TITLE I - PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD
SEC. 104. INSPECTIONS OF REGISTERED PUBLIC ACCOUNTING FIRMS.
(a) IN GENERAL. - The Board shall conduct a continuing program of inspections
to assess the degree of compliance of each registered public accounting firm
and associated persons of that firm with this Act, the rules of the Board, the
rules of the Commission, or professional standards, in connection with its performance
of audits, issuance of audit reports, and related matters involving issuers.
(b) INSPECTION FREQUENCY. -
(1) IN GENERAL. - Subject to paragraph (2), inspections required
by this section shall be conducted -
(A) annually with respect to each registered public accounting
firm that regularly provides audit reports for more than 100 issuers; and
(B) not less frequently than once every 3 years with respect
to each registered public accounting firm that regularly provides audit reports
for 100 or fewer issuers.
(2) ADJUSTMENTS TO SCHEDULES. - The Board may, by rule, adjust
the inspection schedules set under paragraph (1) if the Board finds that different
inspection schedules are consistent with the purposes of this Act, the public
interest, and the protection of investors. The Board may conduct special inspections
at the request of the Commission or upon its own motion.
(c) PROCEDURES. - The Board shall, in each inspection under this section, and
in accordance with its rules for such inspections -
(1) identify any act or practice or omission to act by the
registered public accounting firm, or by any associated person thereof, revealed
by such inspection that may be in violation of this Act, the rules of the Board,
the rules of the Commission, the firm’s own quality control policies,
or professional standards;
(2) report any such act, practice, or omission, if appropriate,
to the Commission and each appropriate State regulatory authority; and
(3) begin a formal investigation or take disciplinary action,
if appropriate, with respect to any such violation, in accordance with this
Act and the rules of the Board.
(d) CONDUCT OF INSPECTIONS. - In conducting an inspection of a registered public
accounting firm under this section, the Board shall -
(1) inspect and review selected audit and review engagements
of the firm (which may include audit engagements that are the subject of ongoing
litigation or other controversy between the firm and 1 or more third parties),
performed at various offices and by various associated persons of the firm,
as selected by the Board;
(2) evaluate the sufficiency of the quality control system
of the firm, and the manner of the documentation and communication of that system
by the firm; and
(3) perform such other testing of the audit, supervisory,
and quality control procedures of the firm as are necessary or appropriate in
light of the purpose of the inspection and the responsibilities of the Board.
(e) RECORD RETENTION. - The rules of the Board may require the retention by
registered public accounting firms for inspection purposes of records whose
retention is not otherwise required by section 103 or the rules issued thereunder.
(f) PROCEDURES FOR REVIEW. - The rules of the Board shall provide a procedure
for the review of and response to a draft inspection report by the registered
public accounting firm under inspection. The Board shall take such action with
respect to such response as it considers appropriate (including revising the
draft report or continuing or supplementing its inspection activities before
issuing a final report), but the text of any such response, appropriately redacted
to protect information reasonably identified by the accounting firm as confidential,
shall be attached to and made part of the inspection report.
(g) REPORT. - A written report of the findings of the Board for each inspection
under this section, subject to sub-section (h), shall be -
(1) transmitted, in appropriate detail, to the Commission
and each appropriate State regulatory authority, accompanied by any letter or
comments by the Board or the inspector, and any letter of response from the
registered public accounting firm; and
(2) made available in appropriate detail to the public (subject
to section 105(b)(5)(A), and to the protection of such confidential and proprietary
information as the Board may determine to be appropriate, or as may be required
by law), except that no portions of the inspection report that deal with criticisms
of or potential defects in the quality control systems of the firm under inspection
shall be made public if those criticisms or defects are addressed by the firm,
to the satisfaction of the Board, not later than 12 months after the date of
the inspection report.
(h) INTERIM COMMISSION REVIEW. -
(1) REVIEWABLE MATTERS. - A registered public accounting firm
may seek review by the Commission, pursuant to such rules as the Commission
shall promulgate, if the firm -
(A) has provided the Board with a response, pursuant to rules
issued by the Board under subsection (f), to the substance of particular items
in a draft inspection report, and disagrees with the assessments contained in
any final report prepared by the Board following such response; or
(B) disagrees with the determination of the Board that criticisms
or defects identified in an inspection report have not been addressed to the
satisfaction of the Board within 12 months of the date of the inspection report,
for purposes of subsection (g)(2).
(2) TREATMENT OF REVIEW. - Any decision of the Commission
with respect to a review under paragraph (1) shall not be reviewable under section
25 of the Securities Exchange Act of 1934 (15 U.S.C. 78y), or deemed to be "final
agency action" for purposes of section 704 of title 5, United States Code.
(3) TIMING. - Review under paragraph (1) may be sought during
the 30-day period following the date of the event giving rise to the review
under subparagraph (A) or (B) of paragraph (1).
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