(2) Accounting firms have been implicated in
failed audits that have cost investors billions of dol-
lars when earnings restatements sent stock prices
tumbling.
(3) Auditors have an inherent conflict of inter-
est. They are hired, and fired, by their audit clients.
(4) This conflict of interest pressures auditors
to sign off on substandard financial statements rath-
er than risk losing a large client.
(5) Auditing a public company for the benefit
of small as well as large investors requires independ-
ence.
(6) Therefore the only truly independent audit
is one by a governmental agency.
(7) The Federal Bureau of Audits, closely regu-
lated by the Commission, will provide honest audits
of all publicly traded companies.
SEC. 3. ESTABLISHMENT OF BUREAU.
(a) ESTABLISHMENT.—There is hereby established
within the Commission an independent regulatory agency
to be known as the Federal Bureau of Audits.
(b) FUNCTION OF THE BUREAU.—The Bureau shall
conduct an annual audit of the financial statements that
are required to be submitted by reporting issuers and to
be certified under the securities laws or the rules or regu-
lations thereunder.
(c) OFFICERS.—
(1) BUREAU HEAD.—The head of the Bureau
shall be a Director, who shall be appointed by the
President, by and with the advice and consent of the
Senate.
(2) ADDITIONAL OFFICERS.—There shall also
be in the Bureau a Deputy Director and an Inspec-
tor General, each of whom shall be appointed by the
President, by and with the advice and consent of the
Senate.
(3) TERMS.—The Director, Deputy Director,
and Inspector General shall be appointed for terms
of 12 years, except that—
(A) the first term of office of the Deputy
Director shall be eight years; and
(B) the first term of office of the Inspector
General shall be 4 years.
(d) INDEPENDENCE.—Except as provided in sections
4 and 5, in the performance of their functions, the officers,
employees, or other personnel of the Bureau shall not be
responsible to or subject to the supervision or direction
of any officer, employee, or agent of any other part of the
Commission.
(e) ADMINISTRATIVE SUPPORT.—The Commission
shall provide to the Bureau such support and facilities as
the Director determines it needs to carry out its functions.
(f) RULES.—The Bureau is authorized to establish
such procedural and administrative rules as are necessary
to the exercise of its functions, but the Bureau may not
establish any auditing standards within the jurisdiction of
the Commission under sections 4 and 5.
(g) ADDITIONAL AUTHORITY.—In carrying out any
of its functions, the Bureau shall have the power to hold
hearings, sign and issue subpoenas, administer oaths, ex-
amine witnesses, and receive evidence at any place in the
United States it may designate. The Bureau may, by one
or more of its officers or by such agents as it may des-
ignate, conduct any hearing or other inquiry necessary or
appropriate to its functions, except that nothing in this
subsection shall be deemed to supersede the provisions of
section 556 of title 5, United States Code relating to hear-
ing examiners.
(h) CONFLICT OF INTEREST PROVISIONS.—A person
previously employed by the Bureau may not accept em-
ployment or compensation from an issuer audited by the
Bureau or an accountant that provides audit related serv-
ices to an issuer audited by the Bureau for 10 years after
the last day of employment at the Bureau. Any current
employee of the Bureau shall be required to place all in-
vestments in a blind trust, in accordance with regulations
prescribed by the Commission. The employees of the Bu-
reau who conduct the audits shall be exempt from the civil
service pay system under section 4802 of title 5, United
States Code, and shall be paid salaries that are competi-
tive with similar private sector employment.
(i) LEGAL REPRESENTATION.—Except as provided in
section 518 of title 28, United States Code, relating to
litigation before the Supreme Court, attorneys designated
by the Director of the Bureau may appear for, and rep-
resent the Bureau in, any civil action brought in connec-
tion with any function carried out by the Bureau pursuant
to this Act or as otherwise authorized by law.
SEC. 4. ASSUMPTION OF AUTHORITY BY COMMISSION OVER
AUDITING STANDARDS.
(a) ASSUMPTION OF AUTHORITY.—Pursuant to its
authority under the securities laws to require the certifi-
cation, in accordance with the rules of the Commission,
of financial statements and other documents of reporting
issuers of securities, the Commission shall, by rule, estab-
lish and revise as necessary auditing standards for audits
of such financial statements.
(b) INCORPORATION OF CURRENT STANDARDS.—In
adopting auditing standards under this section, the Com-
mission shall incorporate generally accepted auditing
standards in effect on the date of enactment of this Act,
with such modifications as the Commission determines are
necessary and appropriate in the public interest and for
the protection of investors.
(c) ADDITIONAL REQUIREMENTS FOR RULES.—The
rules prescribed by the Commission under subsection
(a)—
(1) shall be available for public comment for
not less than 90 days;
(2) shall be prescribed not less than 180 days
after the date of enactment of this Act; and
(3) shall be effective on the first January 1 that
occurs after the end of such 180 days.
SEC. 5. FEES FOR THE RECOVERY OF COSTS OF OPER-
ATIONS.
(a) IN GENERAL.—The Commission shall in accord-
ance with this section assess and collect a fee on each re-
porting issuer whose financial statements are audited by
the Bureau. This section applies as of the first fiscal year
that begins after the date of enactment of this Act (re-
ferred to in this section as the ‘‘first applicable fiscal
year’’).
(b) TOTAL
FEE
REVENUES; INDIVIDUAL
FEE
AMOUNTS.—The total fee revenues collected under sub-
for the salaries and expenses of the Bureau an
amount equal to the amount made available by
paragraph (1) for the first applicable fiscal
year, multiplied by the adjustment factor for
such fiscal year (as defined in subsection (f)).
(e) COLLECTION OF UNPAID FEES.—In any case
where the Commission does not receive payment of a fee
assessed under subsection (a) within 30 days after it is
due, such fee shall be treated as a claim of the United
States Government subject to subchapter II of chapter 37
of title 31, United States Code.
(f) DEFINITION
OF ADJUSTMENT FACTOR.—For
purposes of this section, the term ‘‘adjustment factor’’ ap-
plicable to a fiscal year is the lower of—
(1) the Consumer Price Index for all urban con-
sumers (all items; United States city average) for
April of the preceding fiscal year divided by such
Index for April of the first applicable fiscal year; or
(2) the total of discretionary budget authority
provided for programs in categories other than the
defense category for the immediately preceding fiscal
year (as reported in the Office of Management and
Budget sequestration preview report, if available, re-
quired under section 254(c) of the Balanced Budget
and Emergency Deficit Control Act of 1985) divided
by such budget authority for the first applicable fis-
cal year (as reported in the Office of Management
and Budget final sequestration report submitted for
such year).
For purposes of this subsection, the terms ‘‘budget au-
thority’’ and ‘‘category’’ have the meaning given such
terms in the Balanced Budget and Emergency Deficit
Control Act of 1985.’’.
SEC. 5. DEFINITIONS.
As used in this Act:
(1) COMMISSION.—The term ‘‘Commission’’
means the Securities and Exchange Commission.
(2) SECURITIES LAWS.—The term ‘‘securities
laws’’ means the Securities Act of 1933 (15 U.S.C.
77a et seq.), the Securities Exchange Act of 1934
(15 U.S.C. 78a et seq.), the Trust Indenture Act of
1939 (15 U.S.C. 77aaa et seq.), the Investment
Company Act of 1940 (15 U.S.C. 80a–1 et seq.), the
Investment Advisers Act of 1940 (15 U.S.C. 80b et
seq.), and the Securities Investor Protection Act of
1970 (15 U.S.C. 78aaa et seq.).
(3) REPORTING ISSUER.—The term ‘‘reporting
issuer’’ means any registrant under section 12 of the
Securities Exchange Act of 1934 (15 U.S.C. 78l) or
any other issuer required to file periodic reports
under section 13 or 15 of such Act (15 U.S.C. 78m,
78o).
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