Section 101 establishes the Public Company Accounting Oversight Board (Board), a new,independent regulatory body, to oversee the auditing of issuers (public companies which are subjectto the federal securities laws). The Board's oversight of auditors is for the purpose of protecting theinterests of investors. The Board shall not be an agency or establishment of the United States Government and shallbe a nonprofit corporation subject to the District of Columbia Nonprofit Corporation Act. Noemployee shall be deemed an officer, employee, or agent of the federal government. The Board is subject to the oversight of the Securities and Exchange Commission, andsubject to this oversight the Board shall register public accounting firms which prepare audit reportsfor issuers subject to SEC registration, establish standards concerning the preparation of auditreports, conduct inspections of registered public accounting firms, conduct investigations anddisciplinary proceedings where justified upon registered public accounting firms, perform otherduties as determined by the SEC, enforce compliance with the Act, and set the budget and managethe operations of the Board and its staff. The Board shall have five members, who shall be prominent individuals of integrity with ademonstrated commitment to the interests of investors and the public. They must understand thefinancial disclosures required of issuers under the securities laws and the obligations of accountantsconcerning the preparation and issuing of audit reports concerning these disclosures. Only two members of the Board shall be or have been certified public accountants. If oneof those persons is the chairperson, that person may not have been a practicing certified publicaccountant for at least five years before appointment to the Board. Each Board member must serveon a full-time basis and may not have other employment while serving on the Board. No Boardmember can share in the profits of or receive payments from a public accounting firm, except forfixed continuing payments under standard retirement arrangements, subject to conditions imposedby the SEC. Not later than ninety days after the Act's enactment, the SEC, after consulting with theChairman of the Board of Governors of the Federal Reserve System and the Secretary of theTreasury, shall appoint the chairperson of the Board and other initial members and shall designateeach person's term of service. The term of service of each Board member is five years, except that the terms of office of theinitial Board members shall expire in annual increments. Any Board member appointed to fill avacancy occurring before the expiration of the term of the predecessor shall be appointed only forthe remainder of that term. No person may be a member or chairperson of the Board for more than two terms, whetheror not consecutive. A member of the Board may be removed by the SEC for good cause. The Board may issue rules concerning its operation and administration and other matters,subject to the approval of the SEC. The Board must submit an annual report to the SEC; the SEC shall transmit a copy of thatreport to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committeeon Financial Services. Section 102 requires that, beginning 180 days after the Commission determines that theBoard can fulfill its duties, it shall be unlawful for any person not a registered public accounting firmto prepare or issue or participate in the preparation or issuing of any audit report concerning anyissuer. Each accounting firm must submit as part of its application for registration the names of allissuers for which it prepared or issued audit reports during the preceding calendar year; the annualfees received from each issuer for audit services, other accounting services, and non-audit services;other current financial information as requested by the Board; a statement of the firm's qualitycontrol practices; a list of all accountants associated with the firm who help to prepare audit reports;information concerning civil, criminal, or administrative actions or disciplinary proceedings pendingagainst the firm or any person associated with the firm in connection with any audit report; copiesof any disclosures filed by an issuer with the Commission concerning accounting disagreements; andany other specified information. The Board shall approve a completed application for registration not later than 45 days afterthe date of receipt unless the Board issues a notice of disapproval or requests more information. Each registered public accounting firm shall submit an annual report to the Board and may berequired to update reports more frequently. Registration applications and annual reports shall bemade available for public inspection. The Board shall assess and collect a registration fee and an annual fee from each registeredpublic accounting firm to cover the costs of processing and reviewing. Section 103 requires the Board to establish by rule such quality control standards to be usedby registered public accounting firms in the preparation and issuing of audit reports, as required bythe Act or the rules of the Commission or as necessary or appropriate in the public interest or for theprotection of investors. The Board may consult with professional groups of accountants or advisorygroups. The Board's rules shall require that each registered public accounting firm must keep workpapers for at least seven years, provide a concurring or second partner review of the audit report, anddescribe in each audit report the internal control structure and procedures of the issuer. The Board shall cooperate with professional groups of accountants and advisory groups inthe examination of the need for changes in accounting standards. Section 104 requires the Board to conduct a continuing program of inspections to assess thedegree of compliance of each registered public accounting firm. Inspections shall be conductedannually for each registered public accounting firm providing audit reports for more than 100 issuersand at least once every three years for each firm providing audit reports for 100 or fewer issuers. Section 105 requires the Board to issue rules concerning fair procedures for the investigationand disciplining of registered public accounting firms and associated persons of the firms. TheBoard may conduct an investigation of any act or practice by a registered public accounting firmwhich may be a violation of the Act, the Board's rules, or the securities laws concerning preparationand issuing of audit reports and liabilities of accountants. If a registered public accounting firm or person associated with the firm refuses to cooperatewith the investigation, the Board may impose such sanctions as suspending or revoking theregistration of the public accounting firm. The Board may refer an investigation to the Commission, any other federal functionalregulator, the Attorney General of the United States, the attorney general of one or more states, andthe appropriate state regulatory authority. For the most part information received by the Board concerning an investigation shall beprivileged and confidential in any proceeding in federal court, state court, or administrative agencyuntil presented in connection with a public proceeding. If the Board finds that a registered public accounting firm has violated the Act, the rules ofthe Board, or the securities laws concerning audit reports and accountants, it may impose appropriatesanctions, including temporary suspension or permanent revocation of registration; a civil penaltyfor each violation in an amount not more than $100,000 for a natural person or $2,000,000 for anyother person; if in a case involving intentional or other knowing conduct, a fine not more than$750,000 for a natural person or $15,000,000 for any other person; censure; or any other appropriatesanction. Such sanctions as registration suspension and revocation and the larger monetary penaltiesshall apply only to intentional or knowing conduct, including reckless conduct, or in repeatedinstances of negligent conduct. Section 106 states that any foreign accounting firm which prepares or furnishes an auditreport concerning any issuer is subject to the Act and the rules of the Board and the SEC issuedunder the Act to the same extent as a United States public accounting firm. Audit workpapers of theforeign accounting firm shall be produced if a United States public accounting firm relies upon theopinion of a foreign accounting firm in auditing an issuer. The Commission and the Board may exempt any foreign public accounting firm from anyprovision of the Act or from rules of the Board or the Commission in the public interest or for theprotection of investors. Section 107 provides that the Commission shall have oversight and enforcement authorityover the Board. No rule of the Board shall become effective without prior approval by theCommission. The Board is to be treated as a registered securities association for purposes ofapproval of its rules by the Commission. The Commission may modify a sanction imposed by theBoard upon a registered public accounting firm if it finds that the sanction is not necessary orappropriate or is excessive, oppressive, or inadequate. Section 108 allows the Commission to recognize as "generally accepted" for purposes of thesecurities laws any accounting principles established by a standard setting body that is a privateentity, has a board of trustees the majority of whom are not and have not been for two yearsassociated with a registered public accounting firm, is funded as required, has adopted proceduresto ensure prompt changes to accounting principles necessary to reflect changing business practices,and considers the need to keep standards current. This standard setting body must have the capacityto assist the Commission. The standard setting body must submit an annual report to theCommission and the public. The SEC shall conduct a study on adoption by the United States financial reporting systemof a principles-based accounting system to replace the rules-based accounting system. Section 109 concerns funding of the Board and the standard setting body, known as theFinancial Accounting Standards Board. The Board and the standard setting body shall establish anannual budget, which is subject to approval by the SEC. The budget of the Board shall be payable from annual accounting support fees assessed uponpublicly traded companies. Section 201 prohibits a registered public accounting firm which performs an audit for anyissuer to provide to that issuer any non-audit service, such as bookkeeping, financial informationsystems design, actuarial services, management functions, investment banking service, and legalservices. Accounting firms may provide certain other non-audit services, including tax services, foran audit client if the activity is approved by the audit committee of the issuer.