I
107TH CONGRESS
2D SESSION
H. R. 5184
To establish an Office of Audit Review within the Securities and Exchange
Commission to oversee the audits of certain public companies.
IN THE HOUSE OF REPRESENTATIVES
JULY 23, 2002
Mr. DAVIS of Illinois introduced the following bill; which was referred to the
Committee on Financial Services
A BILL
To establish an Office of Audit Review within the Securities
and Exchange Commission to oversee the audits of cer-
tain public companies.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Corporate Auditing
Integrity Act of 2002’’.
SEC. 2. ESTABLISHMENT OF OFFICE OF AUDIT REVIEW.
The Securities and Exchange Commission (referred
to in this Act as the ‘‘Commission’’) shall establish the
Office of Audit Review within the Division of Corporate
Finance of the Commission to oversee the audits of certain
public companies in accordance with the criteria estab-
lished by the Commission under section 5.
SEC. 3. DUTIES OF OFFICE OF AUDIT REVIEW.
The Office of Audit Review established under section
2 shall have the authority to participate in and supervise
all stages of the audit of a public company, including the
authority to—
(1) review the audit plan and procedures of a
public company;
(2) review any documents or work papers re-
lated to the audit before, during, and after the
audit;
(3) submit questions or requests for informa-
tion to the audit committee of a public company and
to the independent auditor of such company;
(4) meet with members of the audit committees
of a public company;
(5) review any agreement between a public com-
pany whereby the public accounting firm which au-
dits the company is to also provide consulting or
other non-audit services to the public company; and
(6) require that a public company be audited by
a public accounting firm that has not audited such
public company during the preceding 3 years.
SEC. 4. FEE SYSTEM AUTHORIZED.
(a) SELF-FINANCING.—The Commission shall estab-
lish rules for the assessment and collection of fees suffi-
cient to recover the costs and expenses of the Office of
Audit Review.
(b) ASSESSMENT AND COLLECTION.—The fees shall
be assessed on public companies that file any financial
statements, reports, or other documents with the Commis-
sion under the Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.). Such fees shall be collected through
the public accounting firm that certifies such statement,
report, or document.
SEC. 5. ESTABLISHMENT OF CRITERIA.
The Commission shall by rule establish criteria to de-
termine which public companies shall be subject to the en-
hanced oversight by the Office of Audit Review. Such cri-
teria shall include—
(1) the size and nature of the public company;
(2) the participation of the public company in
recent mergers;
(3) other key factors including labor relations,
marketing programs, new products, research, and
development; and
(4) any other circumstances identified by the
Commission that pose a high risk of business failure
or wrong doing.
SEC. 6. REPORT.
Within 1 year after the date of enactment of this Act,
the Commission shall transmit to the Committee on Fi-
nancial Services of the House of Representatives a report
on its compliance with this Act. The report shall include
a description of the functioning of the Office of Audit Re-
view, established pursuant to section 2, the activities of
such office under section 3, and a description of the cri-
teria established by the Commission pursuant to section
5.
SEC. 7. DEFINITIONS.
(a) PUBLIC COMPANY.—The term ‘‘public company’’
refers to an issuer (as defined by section 3 of the Securi-
ties Exchange Act of 1934 (15 U.S.C. 78c)), the securities
of which are registered under section 12 of that Act (15
U.S.C. 78l), or that is required to file reports pursuant
to section 15(d) of that Act (15 U.S.C. 78o(d)).
(b) PUBLIC ACCOUNTING FIRM.—The term ‘‘public
accounting firm’’ refers to a firm that conducts an audit
of a public company for purposes of compliance by that
company with the reporting requirements of section 15(d)
of the Securities Exchange Act of 1934 (15 U.S.C.
78o(d)).
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