I
107TH CONGRESS
2D SESSION
H. R. 3970
To improve the setting of accounting standards by the Financial Accounting
Standards Board, to provide sound and uniform accounting and financial
reporting for public utilities, to clarify the responsibility of issuers for
the transparency and honesty of their financial statements and reports,
and to enhance the governance of the accounting profession.
IN THE HOUSE OF REPRESENTATIVES
MARCH 14, 2002
Mr. DINGELL (for himself, Mr. TOWNS, Mr. MARKEY, Ms. DEGETTE, Mr.
BARRETT of Wisconsin, and Mr. ENGEL) introduced the following bill;
which was referred to the Committee on Financial Services, and in addi-
tion to the Committee on Energy and Commerce, for a period to be sub-
sequently determined by the Speaker, in each case for consideration of
such provisions as fall within the jurisdiction of the committee concerned
A BILL
To improve the setting of accounting standards by the Finan-
cial Accounting Standards Board, to provide sound and
uniform accounting and financial reporting for public
utilities, to clarify the responsibility of issuers for the
transparency and honesty of their financial statements
and reports, and to enhance the governance of the ac-
counting profession.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Truth and Accountability in Accounting Act of 2002’’.
(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I—FINANCIAL ACCOUNTING STANDARDS BOARD
RESOLUTION OF ACCOUNTING STANDARDS ISSUES
Sec. 101. Findings.
Sec. 102. Review and evaluation.
Sec. 103. Response by Financial Accounting Standards Board.
Sec. 104. GAO evaluation of review mechanism.
TITLE II—ACCOUNTING AND FINANCIAL REPORTING BY CERTAIN
PUBLIC UTILITIES
Sec. 201. Rulemaking on exemptions, waivers, etc.
Sec. 202. Report to Congress on implementation.
Sec. 203. Annual report.
TITLE III—CERTIFICATION OF FINANCIAL STATEMENTS BY
CORPORATE OFFICERS
Sec. 301. Certification required.
TITLE IV—ACCOUNTING PROFESSION GOVERNANCE
Sec. 401. Purpose.
Sec. 402. Definitions.
Sec. 403. Establishment of the Independent National Board of Accountancy.
Sec. 404. Registration with the Board.
Sec. 405. Duties of the Board.
Sec. 406. Auditor independence.
Sec. 407. Investigations and disciplinary proceedings.
Sec. 408. Securities and Exchange Commission oversight of the Board.
Sec. 409. Foreign public accounting firms.
Sec. 410. Transition.
TITLE V—PRESERVATION OF AUTHORITY
Sec. 501. Securities and Exchange Commission authority not impaired.
TITLE I—FINANCIAL ACCOUNT-
ING STANDARDS BOARD RES-
OLUTION 
OF 
ACCOUNTING
STANDARDS ISSUES
SEC. 101. FINDINGS.
The Congress finds the following:
(1) Transparent accounting plays an important
role in maintaining the efficiency and integrity of
our capital markets.
(2) Investors, creditors, and other consumers of
financial reports rely heavily on credible, trans-
parent, and comparable financial information.
(3) It is in the public interest and appropriate
for the protection of investors that accounting stand-
ards continue to be developed by an independent pri-
vate sector organization that has an open, thorough,
and credible process for the promulgation of gen-
erally accepted accounting standards.
(4) To achieve this goal, it is necessary and ap-
propriate to provide a mechanism for the review of
the funding and standard-setting process of the Fi-
nancial Accounting Standards Board, the inde-
pendent private-sector entity whose mission is to es-
tablish and improve standards of financial account-
ing and reporting for investors, creditors, and other
consumers of financial reports.
SEC. 102. REVIEW AND EVALUATION.
(a) ANNUAL REVIEW.—The Securities and Exchange
Commission shall conduct an annual review of the impact
of unresolved accounting standards issues on the clarity,
transparency, and quality of financial reporting by pub-
licly traded companies. In conducting such review, the
Commission shall consider—
(1) the current state of financial reporting by
publicly traded companies on such unresolved ac-
counting standards issues, including the diversity of
current practices;
(2) the materiality of any changes to financial
results from changing these practices;
(3) the international standards of accounting
and financial reporting on such unresolved account-
ing standards issues; and
(4) such other factors as the Commission deems
necessary or appropriate.
(b) 
UNRESOLVED
ACCOUNTING
STANDARDS
ISSUES.—For the purposes of this section, the term ‘‘un-
resolved accounting standards issue’’ means the open
agenda items of the Financial Accounting Standards
Board and the Financial Accounting Standards Board’s
Emerging Issues Task Force, and any other issues that
the Securities and Exchange Commission has rec-
ommended be added to that agenda.
(c) REPORT REQUIRED.—The Commission shall an-
nually submit to the Committee on Energy and Commerce
of the House of Representatives, the Committee on Bank-
ing, Housing, and Urban Affairs of the Senate, and the
Financial Accounting Standards Board a report on the re-
sults of the review required by subsection (a). Such report
shall include—
(1) an identification of the unresolved account-
ing standards issues that are the most significant in
terms of their effect on the clarity, transparency,
and quality of financial reporting by publicly traded
companies;
(2) the different alternatives available for the
resolution of such accounting standards issues;
(3) a prioritization of such issues based on the
perceived needs of investors, creditors, and other
consumers of financial reports;
(4) the resources required for such resolution,
and the resources likely to be available for such reso-
lution;
(5) an evaluation on the progress made in the
resolution of issues identified in prior annual re-
ports; and
(6) such other information as the Commission
deems necessary or appropriate.
SEC. 103. RESPONSE BY FINANCIAL ACCOUNTING STAND-
ARDS BOARD.
(a) RESPONSE REQUIRED.—Within 60 days after re-
ceiving a report by the Securities and Exchange Commis-
sion under section 102(c), the Financial Accounting
Standards Board shall submit to the Commission, the
Committee on Energy and Commerce of the House of
Representatives, and the Committee on Banking, Hous-
ing, and Urban Affairs of the Senate a response to such
report.
(b) CONTENTS
OF RESPONSE.—The response re-
quired by subsection (a) shall include an analysis of each
of the conclusions contained in the report pursuant to
paragraphs (1) through (6) of section 102(c). Such re-
sponse shall also include—
(1) an analysis by the Board of the appro-
priateness of each of the unresolved accounting
standards issues identified pursuant to section
102(c)(1);
(2) the plans of the Board to attempt to resolve
the unresolved accounting standards issues identified
in pursuant to section 102(c)(1);
(3) the alternatives that the Board intends to
pursue for the resolution of such accounting stand-
ards issues;
(4) the timetable by which the Board will seek
to resolve such issues;
(5) the resources the Board will require for
such resolution, and the resources likely to be avail-
able for such resolution;
(6) reasons for any delays in accomplishing the
timetables described in previous responses of the
Board under this section; and
(7) such other information as the Financial Ac-
counting Standards Board deems necessary or ap-
propriate.
SEC. 104. GAO EVALUATION OF REVIEW MECHANISM.
(a) EVALUATION REQUIRED.—The Comptroller Gen-
eral shall conduct an ongoing evaluation of the process es-
tablished by sections 102 and 103 of this title for the iden-
tification and resolution of accounting standards issues.
(b) REPORTS.—
(1) INTERIM
REPORT.—Within 2 years after
the date of enactment of this Act, the Comptroller
General shall submit an interim report on the eval-
uation required by subsection (a) to the Committee
on Commerce of the House of Representatives and
the Committee on Banking of the Senate.
(2) FINAL REPORT.—The Comptroller General
shall submit a final report on such evaluations to
such Committees within 5 years after such date of
enactment.
(3) CONTENTS OF REPORTS.—Each of such re-
ports shall contain—
(A) an analysis of whether the process is
correctly identifying the current unresolved ac-
counting standards issues;
(B) an analysis of whether the process is
facilitating the efficient resolution of these un-
resolved accounting standards issues;
(C) such recommendations for legislative
changes in the requirements of this title as the
Comptroller General considers appropriate; and
(D) such other information as the Comp-
troller General deems necessary or appropriate.
TITLE II—ACCOUNTING AND FI-
NANCIAL 
REPORTING 
BY
CERTAIN PUBLIC UTILITIES
SEC. 201. RULEMAKING ON EXEMPTIONS, WAIVERS, ETC.
Part III of the Federal Power Act is amended by in-
serting the following new section after section 319 and by
redesignating sections 320 and 321 as sections 321 and
322, respectively:
‘‘SEC. 320. CRITERIA FOR CERTAIN EXEMPTIONS, WAIVERS,
ETC.
‘‘(a) RULE REQUIRED FOR CERTAIN WAIVERS, EX-
EMPTIONS, ETC.— Not later than 6 months after the en-
actment of this Act, the Commission shall promulgate a
rule establishing specific criteria for providing an exemp-
tion, waiver, or other reduced or abbreviated form of com-
pliance with the requirements of sections 204, 301, 304,
and 305 (including any prospective blanket order). Such
criteria shall be sufficient to insure that any such action
taken by the Commission will be consistent with the pur-
poses of such requirements and will otherwise protect the
public interest.
‘‘(b) MORATORIUM ON CERTAIN WAIVERS, EXEMP-
TIONS, ETC.—After the date of enactment of this section,
the Commission may not issue, adopt, order, approve, or
promulgate any exemption, waiver, or other reduced or ab-
breviated form of compliance with the requirements of sec-
tion 204, 301, 304, or 305 (including any prospective
blanket order) until after the rule promulgated under sub-
section (a) has taken effect.
‘‘(c) PREVIOUS FERC ACTION.—The Commission
shall undertake a review, by rule or order, of each action
described in subsection (a) that was taken before the date
of enactment of this section. No such action may continue
in force and effect after the date 18 months after the date
of enactment of this section unless the Commission finds
that such action complies with the rule under subsection
(a).
‘‘(d) EXEMPTION UNDER 204(f) NOT APPLICA-
BLE.—For purposes of this section, in applying section
204, the provisions of section 204(f) shall not apply.’’.
SEC. 202. REPORT TO CONGRESS ON IMPLEMENTATION.
Within 12 months of the date of the enactment of
this Act, the Federal Energy Regulatory Commission shall
report to the Committee on Energy and Commerce of the
United States House of Representatives and the Com-
mittee on Energy and Natural Resources of the United
States Senate on what specific measures the Commission
has taken to comply with the amendments made by section
201.
SEC. 203. ANNUAL REPORT.
The Federal Energy Regulatory Commission shall
provide an annual report to the Committee on Energy and
Commerce of the United States House of Representatives
and the Committee on Energy and Natural Resources of
the United States Senate summarizing the financial and
operating condition of power marketers. Such report shall
summarize the information provided to the Commission in
periodic and special reports filed by power marketers, and
include an analysis by the Commission of key trends or
issues affecting the capital structure and financial condi-
tion of such companies, including use of leverage, deriva-
tives transactions, and other material information.
TITLE 
III—CERTIFICATION 
OF
FINANCIAL STATEMENTS BY
CORPORATE OFFICERS
SEC. 301. CERTIFICATION REQUIRED.
Section 13 of the Securities Exchange Act of 1934
(15 U.S.C. 78m) is amended by adding at the end the
following new subsection:
‘‘(i) CERTIFICATION OF FINANCIAL STATEMENTS BY
CORPORATE OFFICERS.—
‘‘(1) STATEMENT
TO
SHAREHOLDERS.—Any
periodic report filed under this section shall include,
in accordance with such rules as the Commission
may prescribe under this section, a statement ad-
dressed to the investors and potential investors in
the issuer and signed by the chief executive officer
and chief financial officer of the issuer that attests
that—
‘‘(A) the financial statements contained in
such report (including the balance sheet, income
statement, and cash flow statement) have been
prepared by the management of the issuer;
‘‘(B) the signing officers believe and affirm
that such financial statements fairly present to
investors, with clarity and completeness, the
issuer’s financial position and performance for
the reporting period in accordance with gen-
erally accepted accounting principles and the
disclosure requirements of this title and the
rules and regulations thereunder; and
‘‘(C) the issuer’s internal controls and in-
ternal audit procedures are consistent with best
current accounting practices and fully comply
with subsection (b)(2) of this section.
‘‘(2) NO
DELEGATION.—The responsibility to
sign the statements required by paragraph (1) may
not be delegated to any officer, employee, or agent
of the issuer, except that if an issuer does not have
a chief executive officer or chief financial officer (as
defined in rules prescribed by the Commission under
this subsection), such rules may permit an specified
alternative officer to sign such statements.’’.
TITLE IV—ACCOUNTING
PROFESSION GOVERNANCE
SEC. 401. PURPOSE.
The purposes of this title are—
(1) to create a new organization, subject to
Commission oversight, with adequate authority and
resources—
(A) to register public accounting firms that
furnish accountant’s reports with respect to fi-
nancial statements, reports, or other documents
required to be filed with the Commission under
the securities laws;
(B) to promulgate and enforce compliance
with quality control and auditing standards de-
signed to improve the quality of audits con-
ducted by such firms;
(C) to administer a continuing program of
inspection of the accounting and auditing prac-
tices of public accounting firms registered with
the Board; and
(D) to investigate and discipline appro-
priately such firms, and persons associated with
such firms, who violate this title, the securities
laws, the rules and regulations thereunder,
rules adopted by the Board, or professional
standards;
(2) to require public accounting firms fur-
nishing any report with respect to financial state-
ments, reports, or other documents required to be
filed with the Securities and Exchange Commission
under the securities laws to be registered with that
Board; and
(3) to authorize the Board to establish quality
control and auditing standards for audits of public
companies, administer an audit and professional
services inspection program, and undertake inves-
tigations and disciplinary proceedings with respect to
public accounting firms and persons associated with
such firms.
SEC. 402. DEFINITIONS.
As used in this title, unless the context otherwise
requires—
(1) ACCOUNTANT’S
REPORT.—The term ‘‘ac-
countant’s report’’ means a document in which a
public accounting firm identifies a financial state-
ment, report, or other document and sets forth its
opinion regarding such financial statement, report,
or other document, or an assertion that an opinion
cannot be expressed.
(2) BOARD.—The term ‘‘Board’’ means the
Independent National Board of Accountancy estab-
lished under this title.
(3) COMMISSION.—The term ‘‘Commission’’
means the Securities and Exchange Commission.
(4) INTERMEDIARY.—The term ‘‘intermediary’’
means those parties who may advise 1 or more prin-
cipals to a transaction and may include, but are not
limited to, attorneys and investment, merchant, and
commercial bankers.
(5) PERSON ASSOCIATED WITH A PUBLIC AC-
COUNTING FIRM.—The term ‘‘person associated with
a public accounting firm’’ means any individual pro-
prietor, partner, shareholder, principal, professional
employee, or any other natural person or entity
who—
(A) shares in the profits of a public ac-
counting firm; or
(B) engages in any conduct or practice in
connection with the preparation of any account-
ant’s report with respect to any financial state-
ment, report, or other document required to be
filed with the Commission under the securities
laws.
(6) PROFESSIONAL
STANDARDS.—The term
‘‘professional standards’’ means generally accepted
accounting principles, generally accepted auditing
standards, generally accepted standards for attesta-
tion engagements, generally accepted quality control
policies and procedures, and any other standards re-
lated to the preparation of financial statements or
accountant’s reports, or to auditor ethics and inde-
pendence, and promulgated by the Commission, the
Board, or by a standard setting body generally rec-
ognized or endorsed by the Commission or the
Board.
(7) PUBLIC
ACCOUNTING
FIRM.—The term
‘‘public accounting firm’’ means—
(A) a sole proprietorship, incorporated as-
sociation, partnership, corporation, limited li-
ability company, limited liability partnership, or
other legal entity that is engaged in the practice
of public accounting or furnishing reports with
respect to financial statements, reports, or
other documents filed with the Commission;
(B) in the event an entity described in sub-
paragraph (A) leases or otherwise acquires on a
temporary or continuous basis the services of
personnel or other assets employed full- or part-
time by another entity (the ‘‘lessor’’), to the ex-
tent so designated by the Board, the lessor and
the lessor’s board of directors, management,
employees, and shareholders of 10 percent or
more of the lessor’s equity securities;
(C) in the event an entity described in sub-
paragraph (A) or an affiliate of such entity has
public shareholders, to the extent so designated
by the Board, those public shareholders and
their affiliates; and
(D) such other affiliates of an entity de-
scribed in subparagraph (A) as designated by
the Board.
(8) SECURITIES
LAW.—The term ‘‘securities
laws’’ has the same meaning as prescribed in section
3(a)(47) of the Securities Exchange Act of 1934.
(9) STATE.—The term ‘‘State’’ means any
State of the United States, the District of Columbia,
Puerto Rico, the Virgin Islands, or any other posses-
sion of the United States.
SEC. 403. ESTABLISHMENT OF THE INDEPENDENT NA-
TIONAL BOARD OF ACCOUNTANCY.
(a) ESTABLISHMENT OF THE BOARD.—No later than
180 days after the date of the enactment of this Act, the
Commission shall establish an Independent National
Board of Accountancy to perform the duties set forth in
this title, which shall be located in the District of Colum-
bia.
(b) MEMBERSHIP OF THE BOARD.—
(1) COMPOSITION.—The Board shall be com-
posed of 5 members. Members shall be prominent in-
dividuals of integrity and reputation who have a
commitment to the interests of investors and the
public. No more than 2 of the 5 members may be
present or former certified public accountants who
are eligible if they—
(A) are not currently in public practice;
(B) have not for a period of at least 3
years been associated with a public accounting
firm; and
(C) do not currently share in the profits of
or receive payments from such a firm.
(2) APPOINTMENT.—The Chair and members
of the Board shall be appointed by the Commission
from a list of recommended individuals provided
under paragraph (3).
(3) RECOMMENDATIONS.—At the time of any
vacancy, the Comptroller General shall submit to the
Commission a list of at least 3 individuals who are
eligible for service on the Board or as Chair and who
are recommended by the Comptroller General. The
Commission may ask the Comptroller General to
recommend additional individuals.
(4) FULL-TIME SERVICE.—All members of the
Board shall serve on a full-time basis, severing all
ties with their former firms or employers, except as
authorized by the Commission.
(5) TERMS OF OFFICE.—Each member of the
Board shall hold office for a term of 5 years and
until a successor is appointed, except that—
(A) any member appointed to fill a vacancy
occurring prior to the expiration of the term of
a predecessor shall be eligible to serve for the
remainder of that term; and
(B) the terms of office of the initial Board
members shall expire, as designated by the
Commission at the time of appointment, 1 at
the end of 1 year, 1 at the end of 2 years, 1
at the end of 3 years, 1 at the end of 4 years,
and 1 at the end of 5 years after the establish-
ment of the Board.
(6) MULTIPLE TERMS.—A member may be re-
appointed to the Board, but in no instance may a
member serve more than 2 terms.
(7) REMOVAL.—A member of the Board may be
removed from office for cause prior to the expiration
of his or her term by either a majority vote of the
other members of the Board, subject to the approval
of the Commission, or by the Commission pursuant
to section 408(f)(2) of this title.
(c) OPERATION OF THE BOARD.—
(1) RULES.—The Board shall propose and
adopt rules—
(A) to provide for the operation and ad-
ministration of the Board, and the compensa-
tion of the members of the Board;
(B) to provide for the appointment and
compensation of such accountants, attorneys,
employees, and consultants as may be necessary
or appropriate to carry out the Board’s func-
tions under this title;
(C) to provide for the registration of public
accounting firms with the Board pursuant to
section 404 of this title; and
(D) to enter into contracts, incur expenses,
and take such other actions as may be nec-
essary or appropriate for it to perform its du-
ties under this title.
(2) COMPENSATION.—Members of the Board
shall be compensated at a level comparable to simi-
lar professional positions in the private sector. Sala-
ries of members of the Board shall be subject to an-
nual review and approval by the Commission.
(d) REGISTRATION AND ANNUAL FEES.—The Board
shall assess and collect a registration fee and annual dues
from each public accounting firm registered with the
Board. The fees shall be subject to the annual review and
approval of the Commission. Such fees and dues shall be
assessed at a level sufficient to recover the costs and ex-
penses of the Board and to permit the Board to operate
on a self-funding basis. The amount of fees and dues for
each public accounting firm shall be based upon—
(1) the annual revenues of such firm from ac-
counting, auditing, and other professional services
provided to Commission registrants;
(2) the number of persons associated with the
firm;
(3) the number of entities for which the firm
furnishes accountant’s reports with respect to finan-
cial statements, reports, or other documents required
to be filed with the Commission under the securities
laws; and
(4) such other criteria as the Board, with the
approval of the Commission, may establish.
(e) SPECIAL FEES.—The Board may prescribe fees,
and collect its costs incurred, in connection with inspec-
tions and disciplinary actions conducted in accordance
with this title provided that such fees and costs shall fairly
reflect the cost to the Board of providing such services.
(f) ANNUAL REPORT.—The Board shall submit to
the Commission for its review and approval, an annual re-
port and budget. The annual report shall include a de-
scription of the Board’s activities, its audited financial
statements and such other matters as the Board or the
Commission considers appropriate. The Board shall also
submit its annual report to Congress.
SEC. 404. REGISTRATION WITH THE BOARD.
(a) 
MANDATORY
REGISTRATION
WITH
THE
BOARD.—Beginning 1 year after the date of the establish-
ment of the Board, it shall be unlawful for any public ac-
counting firm to furnish an accountant’s report with re-
spect to any financial statement, report or other document
required to be filed with the Commission under the securi-
ties laws unless such firm—
(1) is registered with the Board; and
(2) has paid all applicable registration and an-
nual fees pursuant to section 403(d) of this title.
(b) APPLICATION FOR REGISTRATION.—A public ac-
counting firm may be registered under this title by filing
with the Board an application for registration in such
form and containing such information as the Board, by
rule, may prescribe. Each application shall include the fol-
lowing:
(1) CLIENTS AND CLIENT FEES.—The names of
all clients of the public accounting firm for which
the firm furnishes accountant’s reports with respect
to financial statements, reports, or other documents
required to be filed with the Commission and, for
each such client, the annual fees received from such
client by such firm in connection with—
(A) performance of the annual audit and
quarterly interim reviews of the client’s finan-
cial statements filed with the Commission under
the securities laws;
(B) other accounting and auditing services;
(C) tax services;
(D) 
information 
technology 
consulting
services; and
(E) all other consulting or advisory serv-
ices in such detail as the Board shall determine.
(2) FIRM FINANCIAL INFORMATION.—Financial
information of the public accounting firm for its
most recent fiscal year, including its annual reve-
nues in total and the aggregate from each of ac-
counting and auditing, tax and other professional
services provided to Commission registrants, and the
firm’s total assets, total liabilities and net equity.
(3) INSURANCE INFORMATION.—The names of
the liability insurance carrier, if any, of the public
accounting firm and of persons associated with the
public accounting firm.
(4) QUALITY CONTROL.—A copy of the public
accounting firm’s policies and procedures with re-
spect to quality control of its accounting and audit-
ing practice.
(5) ASSOCIATED PERSONS.—A list of the per-
sons associated with the public accounting firm, the
license or certification number of such person, and
a brief statement of each such person’s education
and experience.
(6) PENDING PROCEEDINGS.—Information re-
lating to criminal, civil, or administrative actions or
disciplinary proceedings pending against the firm or
any person associated with the firm in connection
with any accountant report furnished by such firm.
(7) SUCCESSOR AUDIT APPOINTMENTS.—A list
of issuers for which the public accounting firm has
been appointed as a successor auditor in the most
recently completed fiscal year and where unresolved
disagreements existed between the successor and
predecessor auditor on the application of generally
accepted accounting principles. The list shall also de-
scribe in adequate detail the nature of such disagree-
ments.
(8) ADDITIONAL
INFORMATION.—Such other
information as the Board or the Commission con-
siders necessary or appropriate.
(c) PERIODIC REPORTS.—Annually, or within 15
business days with respect to matters reported pursuant
to paragraphs (6) and (7) of subsection (b) of this section,
or more frequently as the Board may prescribe, each pub-
lic accounting firm registered with the Board shall submit
reports to the Board updating the information contained
in its application for registration and containing such ad-
ditional information as the Board may prescribe. Such an-
nual or periodic reports, or parts thereof as designated
by the Board or the Commission, shall be available for
public inspection, including inspection by means of the
Internet.
(d) EXEMPTIONS AND DELEGATION.—The Commis-
sion, by rule, upon its own motion or upon application,
may conditionally or unconditionally exempt any public ac-
counting firm or any accountant’s report, or any class of
public accounting firms or any class of accountant’s re-
ports, from any provisions of this title or the rules or regu-
lations thereunder, if the Commission finds that such ex-
emption is consistent with the public interest, the protec-
tion of investors, and the purposes of this title. The Com-
mission may delegate to the Board its authority, including
its remedial and disciplinary authority with respect to pub-
lic accounting firms, persons associated with public ac-
counting firms, and an accounting person associated with
an issuer.
SEC. 405. DUTIES OF THE BOARD.
(a) QUALITY CONTROL STANDARDS.—The Board
shall seek to promote high professional standards among
public accounting firms registered with the Board, to im-
prove the quality of audit services provided by such firms,
and, in general, to protect investors and promote the pub-
lic interest. In furtherance of these goals, the Board shall
take the following actions:
(1) PROMULGATION AND ENFORCEMENT.—
(A) AUTHORITY.—Promulgate and enforce
compliance with such standards of quality con-
trol as the Board, by rule, shall prescribe as
necessary or appropriate in the public interest
or for the protection of investors in connection
with the preparation and issuance by public ac-
counting firms registered with the Board of ac-
countant’s reports with respect to financial
statements, reports, or other documents re-
quired to be filed with the Commission under
the securities laws. Such standards of quality
control shall include, among such other require-
ments that the Board may prescribe, policies
and procedures for the following:
(i) The monitoring by the public ac-
counting firm of its professional ethics in-
cluding its independence from its audit cli-
ents.
(ii) The assignment of personnel to
engagements.
(iii) Consultation within the firm or
with other accountants on accounting and
auditing questions.
(iv) The supervision of audit work.
(v) The hiring, professional develop-
ment, and advancement of personnel.
(vi) The acceptance and continuation
of clients.
(vii) The internal inspection of the
firm’s own compliance with such policies
and procedures.
(B) 
MANDATORY
STANDARDS.—Such
standards shall include the requirements that
each public accounting firm registered with the
Board—
(i) prepare and maintain for a period
of no less than 7 years, audit work papers
and other information related to any ac-
countant’s report, in sufficient detail to
support the conclusions reached in such ac-
countant’s report;
(ii) provide a ‘‘concurring’’ or ‘‘sec-
ond’’ partner review of such audit work pa-
pers and other related information by a
qualified person (as prescribed by the
Board) associated with the public account-
ing firm, other than the person in charge
of the audit, or by an independent reviewer
(as prescribed by the Board); and
(iii) secure the concurring approval of
such qualified person or independent re-