TITLE I - PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD
SEC. 103. AUDITING, QUALITY CONTROL, AND INDEPENDENCE STANDARDS AND RULES.
(a) AUDITING, QUALITY CONTROL, AND ETHICS STANDARDS. -
(1) IN GENERAL. - The Board shall, by rule, establish, including,
to the extent it determines appropriate, through adoption of standards proposed
by 1 or more professional groups of accountants designated pursuant to paragraph
(3)(A) or advisory groups convened pursuant to paragraph (4), and amend or otherwise
modify or alter, such auditing and related attestation standards, such quality
control standards, and such ethics standards to be used by registered public
accounting firms in the preparation and issuance of audit reports, as required
by this Act or the rules of the Commission, or as may be necessary or appropriate
in the public interest or for the protection of investors.
(2) RULE REQUIREMENTS. - In carrying out paragraph (1), the
Board -
(A) shall include in the auditing standards that it adopts,
requirements that each registered public accounting firm shall -
(i) prepare, and maintain for a period of not less than 7
years, audit work papers, and other information related to any audit report,
in sufficient detail to support the conclusions reached in such report;
(ii) provide a concurring or second partner review and approval
of such audit report (and other related information), and concurring approval
in its issuance, by a qualified person (as prescribed by the Board) associated
with the public accounting firm, other than the person in charge of the audit,
or by an independent reviewer (as prescribed by the Board); and
(iii) describe in each audit report the scope of the auditor’s
testing of the internal control structure and procedures of the issuer, required
by section 404(b), and present (in such report or in a separate report) -
(I) the findings of the auditor from such testing;
(II) an evaluation of whether such internal control structure
and procedures-
(aa) include maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the assets
of the issuer;
(bb) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures
of the issuer are being made only in accordance with authorizations of management
and directors of the issuer; and
(III) a description, at a minimum, of material weaknesses
in such internal controls, and of any material noncompliance found on the basis
of such testing.
(B) shall include, in the quality control standards that it
adopts with respect to the issuance of audit reports, requirements for every
registered public accounting firm relating to -
(i) monitoring of professional ethics and independence from
issuers on behalf of which the firm issues audit reports;
(ii) consultation within such firm on accounting and auditing
questions;
(iii) supervision of audit work;
(iv) hiring, professional development, and advancement of
personnel;
(v) the acceptance and continuation of engagements;
(vi) internal inspection; and
(vii) such other requirements as the Board may prescribe,
subject to subsection (a)(1).
(3) AUTHORITY TO ADOPT OTHER STANDARDS. -
(A) IN GENERAL. - In carrying out this subsection, the Board
-
(i) may adopt as its rules, subject to the terms of section
107, any portion of any statement of auditing standards or other professional
standards that the Board determines satisfy the requirements of paragraph (1),
and that were proposed by 1 or more professional groups of accountants that
shall be designated or recognized by the Board, by rule, for such purpose, pursuant
to this paragraph or 1 or more advisory groups convened pursuant to paragraph
(4); and
(ii) notwithstanding clause (i), shall retain full authority
to modify, supplement, revise, or subsequently amend, modify, or repeal, in
whole or in part, any portion of any statement described in clause (i).
(B) INITIAL AND TRANSITIONAL STANDARDS. - The Board shall
adopt standards described in subparagraph (A)(i) as initial or transitional
standards, to the extent the Board determines necessary, prior to a determination
of the Commission under section 101(d), and such standards shall be separately
approved by the Commission at the time of that determination, without regard
to the procedures required by section 107 that otherwise would apply to the
approval of rules of the Board.
(4) ADVISORY GROUPS. - The Board shall convene, or authorize
its staff to convene, such expert advisory groups as may be appropriate, which
may include practicing accountants and other experts, as well as representatives
of other interested groups, subject to such rules as the Board may prescribe
to prevent conflicts of interest, to make recommendations concerning the content
(including proposed drafts) of auditing, quality control, ethics, independence,
or other standards required to be established under this section.
(b) INDEPENDENCE STANDARDS AND RULES. - The Board shall establish such rules
as may be necessary or appropriate in the public interest or for the protection
of investors, to implement, or as authorized under, title II of this Act.
(c) COOPERATION WITH DESIGNATED PROFESSIONAL GROUPS OF ACCOUNTANTS AND ADVISORY
GROUPS.-
(1) IN GENERAL.-The Board shall cooperate on an ongoing basis
with professional groups of accountants designated under subsection (a)(3)(A)
and advisory groups convened under subsection (a)(4) in the examination of the
need for changes in any standards subject to its authority under subsection
(a), recommend issues for inclusion on the agendas of such designated professional
groups of accountants or advisory groups, and take such other steps as it deems
appropriate to increase the effectiveness of the standard setting process.
(2) BOARD RESPONSES. - The Board shall respond in a timely
fashion to requests from designated professional groups of accountants and advisory
groups referred to in paragraph (1) for any changes in standards over which
the Board has authority.
(d) EVALUATION OF STANDARD SETTING PROCESS.-The Board shall include in the
annual report required by section 101(h) the results of its standard setting
responsibilities during the period to which the report relates, including a
discussion of the work of the Board with any designated professional groups
of accountants and advisory groups described in paragraphs (3)(A) and (4) of
subsection (a), and its pending issues agenda for future standard setting projects.
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