[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3970 Introduced in House (IH)]







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 
 addition to the Committee on Energy and Commerce, for a period to be 
subsequently 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 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.

    Be it enacted by the Senate and House of Representatives 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 ACCOUNTING STANDARDS BOARD RESOLUTION 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, transparent, and comparable 
        financial information.
            (3) It is in the public interest and appropriate for the 
        protection of investors that accounting standards continue to 
        be developed by an independent private sector organization that 
        has an open, thorough, and credible process for the 
        promulgation of generally accepted accounting standards.
            (4) To achieve this goal, it is necessary and appropriate 
        to provide a mechanism for the review of the funding and 
        standard-setting process of the Financial Accounting Standards 
        Board, the independent private-sector entity whose mission is 
        to establish and improve standards of financial accounting 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 publicly traded companies. In conducting such review, the 
Commission shall consider--
            (1) the current state of financial reporting by publicly 
        traded companies on such unresolved accounting 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 accounting 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 ``unresolved 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 
recommended be added to that agenda.
    (c) Report Required.--The Commission shall annually submit to the 
Committee on Energy and Commerce of the House of Representatives, the 
Committee on Banking, Housing, and Urban Affairs of the Senate, and the 
Financial Accounting Standards Board a report on the results of the 
review required by subsection (a). Such report shall include--
            (1) an identification of the unresolved accounting 
        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 resolution;
            (5) an evaluation on the progress made in the resolution of 
        issues identified in prior annual reports; and
            (6) such other information as the Commission deems 
        necessary or appropriate.

SEC. 103. RESPONSE BY FINANCIAL ACCOUNTING STANDARDS BOARD.

    (a) Response Required.--Within 60 days after receiving a report by 
the Securities and Exchange Commission 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, Housing, and Urban Affairs of the Senate 
a response to such report.
    (b) Contents of Response.--The response required 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 
response shall also include--
            (1) an analysis by the Board of the appropriateness 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 standards 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 available 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 Accounting 
        Standards Board deems necessary or appropriate.

SEC. 104. GAO EVALUATION OF REVIEW MECHANISM.

    (a) Evaluation Required.--The Comptroller General shall conduct an 
ongoing evaluation of the process established by sections 102 and 103 
of this title for the identification 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 evaluation 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 reports shall 
        contain--
                    (A) an analysis of whether the process is correctly 
                identifying the current unresolved accounting standards 
                issues;
                    (B) an analysis of whether the process is 
                facilitating the efficient resolution of these 
                unresolved 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 Comptroller 
                General deems necessary or appropriate.

    TITLE II--ACCOUNTING AND FINANCIAL REPORTING BY CERTAIN PUBLIC 
                               UTILITIES

SEC. 201. RULEMAKING ON EXEMPTIONS, WAIVERS, ETC.

    Part III of the Federal Power Act is amended by inserting 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, Exemptions, Etc.-- Not 
later than 6 months after the enactment of this Act, the Commission 
shall promulgate a rule establishing specific criteria for providing an 
exemption, waiver, or other reduced or abbreviated form of compliance 
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 purposes of such requirements and will otherwise protect the public 
interest.
    ``(b) Moratorium on Certain Waivers, Exemptions, 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 abbreviated form of compliance with the requirements of section 204, 
301, 304, or 305 (including any prospective blanket order) until after 
the rule promulgated under subsection (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 Applicable.--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 Committee 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 
condition of such companies, including use of leverage, derivatives 
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 
        addressed 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 generally accepted accounting 
                principles and the disclosure requirements of this 
                title and the rules and regulations thereunder; and
                    ``(C) the issuer's internal controls and internal 
                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 financial 
                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 designed to 
                improve the quality of audits conducted by such firms;
                    (C) to administer a continuing program of 
                inspection of the accounting and auditing practices of 
                public accounting firms registered with the Board; and
                    (D) to investigate and discipline appropriately 
                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 furnishing any 
        report with respect to financial statements, 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 investigations 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 ``accountant's report'' 
        means a document in which a public accounting firm identifies a 
        financial statement, 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 established 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 principals to a transaction 
        and may include, but are not limited to, attorneys and 
        investment, merchant, and commercial bankers.
            (5) Person associated with a public accounting firm.--The 
        term ``person associated with a public accounting firm'' means 
        any individual proprietor, partner, shareholder, principal, 
        professional employee, or any other natural person or entity 
        who--
                    (A) shares in the profits of a public accounting 
                firm; or
                    (B) engages in any conduct or practice in 
                connection with the preparation of any accountant's 
                report with respect to any financial statement, 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 attestation engagements, generally accepted 
        quality control policies and procedures, and any other 
        standards related to the preparation of financial statements or 
        accountant's reports, or to auditor ethics and independence, 
        and promulgated by the Commission, the Board, or by a standard 
        setting body generally recognized or endorsed by the Commission 
        or the Board.
            (7) Public accounting firm.--The term ``public accounting 
        firm'' means--
                    (A) a sole proprietorship, incorporated 
                association, partnership, corporation, limited 
                liability 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 
                subparagraph (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 extent 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 
                subparagraph (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 described 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 possession of the United States.

SEC. 403. ESTABLISHMENT OF THE INDEPENDENT NATIONAL 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 
Columbia.
    (b) Membership of the Board.--
            (1) Composition.--The Board shall be composed of 5 members. 
        Members shall be prominent individuals 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 establishment of the Board.
            (6) Multiple terms.--A member may be reappointed 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 administration 
                of the Board, and the compensation 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 functions 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 necessary or 
                appropriate for it to perform its duties under this 
                title.
            (2) Compensation.--Members of the Board shall be 
        compensated at a level comparable to similar professional 
        positions in the private sector. Salaries of members of the 
        Board shall be subject to annual 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 expenses 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 accounting, 
        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 financial 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 inspections 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 report and budget. The annual report 
shall include a description 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 establishment of the Board, it shall be unlawful for 
any public accounting firm to furnish an accountant's report with 
respect to any financial statement, report or other document required 
to be filed with the Commission under the securities laws unless such 
firm--
            (1) is registered with the Board; and
            (2) has paid all applicable registration and annual fees 
        pursuant to section 403(d) of this title.
    (b) Application for Registration.--A public accounting 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 following:
            (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 financial 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 services 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 revenues in total and the aggregate from 
        each of accounting 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 respect to quality control 
        of its accounting and auditing practice.
            (5) Associated persons.--A list of the persons 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 relating 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 
        describe in adequate detail the nature of such disagreements.
            (8) Additional information.--Such other information as the 
        Board or the Commission considers 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 public accounting firm registered with the Board shall 
submit reports to the Board updating the information contained in its 
application for registration and containing such additional information 
as the Board may prescribe. Such annual 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 Commission, by rule, upon its 
own motion or upon application, may conditionally or unconditionally 
exempt any public accounting firm or any accountant's report, or any 
class of public accounting firms or any class of accountant's reports, 
from any provisions of this title or the rules or regulations 
thereunder, if the Commission finds that such exemption is consistent 
with the public interest, the protection of investors, and the purposes 
of this title. The Commission may delegate to the Board its authority, 
including its remedial and disciplinary authority with respect to 
public accounting firms, persons associated with public accounting 
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 improve the quality of audit services provided by 
such firms, and, in general, to protect investors and promote the 
public 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 control 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 accounting firms registered with the Board of 
                accountant's reports with respect to financial 
                statements, reports, or other documents required to be 
                filed with the Commission under the securities laws. 
                Such standards of quality control shall include, among 
                such other requirements that the Board may prescribe, 
                policies and procedures for the following:
                            (i) The monitoring by the public accounting 
                        firm of its professional ethics including its 
                        independence from its audit clients.
                            (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 development, 
                        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 accountant's report, 
                        in sufficient detail to support the conclusions 
                        reached in such accountant's report;
                            (ii) provide a ``concurring'' or ``second'' 
                        partner review of such audit work papers and 
                        other related information 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) secure the concurring approval of 
                        such qualified person or independent reviewer 
                        as a necessary prerequisite to the issuance of 
                        the accountant's report.
            (2) Inspections.--
                    (A) In general.--Conduct a continuing program of 
                inspections of each public accounting firm registered 
                with the Board to assess compliance by such firm, and 
                by persons associated with such firm, with applicable 
                provisions of this title, the securities laws, the 
                rules and regulations thereunder, the rules adopted by 
                the Board, and professional standards.
                    (B) Ongoing inspections.--Inspections of each firm 
                that audits more than 100 issuers shall be conducted on 
                an ongoing annual basis, and all other public 
                accounting firms no less than at least once every 3 
                years, and shall, among other matters that the Board 
                may prescribe, identify and report any act or practice, 
                or omission to act, by such firm, or by any person 
                associated with such firm, that is found to be in 
                violation of any such provision.
                    (C) Required evaluations.--In conducting such 
                inspections, the Board shall, among other things, 
                inspect selected audit and review engagements performed 
                at various offices and by various persons associated 
                with the public accounting firm under inspection, and, 
                in connection with the inspection, evaluate--
                            (i) whether the firm's quality control 
                        system is appropriate;
                            (ii) whether the firm's policies and 
                        procedures are adequately documented and 
                        communicated to its personnel;
                            (iii) whether there is compliance with such 
                        policies and procedures sufficient to provide 
                        reasonable assurance of conformity with 
                        professional standards; and
                            (iv) whether professional accounting, 
                        auditing, and independence and ethics standards 
                        were complied with.
                    (D) Report of findings.--In connection with each 
                review, the Board, shall prepare a report of its 
                findings, and such report, accompanied by any letter of 
                comments by the Board or reviewer and any letter of 
                response from the firm under review, shall be made 
                available to the public.
            (3) Discipline.--Provide that public accounting firms 
        registered with the Board, and persons associated with such 
        firms, shall be appropriately disciplined in accordance with 
        the provisions of section 407 of this title for violation of 
        any provision of this title, the securities laws, the rules or 
        regulations thereunder, the rules adopted by the Board, or 
        professional standards.
            (4) Records maintenance.--Prescribe records to be made and 
        kept by public accounting firms and the periods for which, and 
        physical location where, such records shall be kept to 
        facilitate the reviews required under this title.
    (b) Auditing Standards.--The Board shall promulgate and enforce 
compliance with such auditing standards 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 accounting firms registered with the Board of accountants' 
reports with respect to financial statements, reports, or other 
documents required to be filed with the Commission under the securities 
laws.
    (c) Other Duties.--The Board shall perform such other duties or 
functions as the Commission determines are necessary or appropriate in 
the public interest for the protection of investors and to carry out 
the purposes of this title.

SEC. 406. AUDITOR INDEPENDENCE.

    (a) Rules; Criteria.--The Commission shall have the authority and 
responsibility for promulgating and interpreting auditor independence 
rules. For purposes of the securities laws, a public accounting firm 
shall not be deemed independent of an audit client if any of the 
following conditions or circumstances applies:--
            (1) Prior employment of officers.--An issuer's chief 
        executive officer, chief financial officer, controller or 
        principal accounting officer, or any equivalent position was a 
        person associated with the public accounting firm during any 
        period in the most recent 2 years, on which the public 
        accounting firm sets forth its independent accountant's report 
        on the financial statements required to be filed with the 
        Commission under the securities laws.
            (2) Non-audit service.--
                    (A) Limitation.--The auditor has provided services 
                in any year other than those required by professional 
                standards in connection with rendering an independent 
                accountant's audit or review report on the financial 
                statements of the issuer, and the audit committee has 
                not preapproved those services that were individually 
                or in the aggregate in excess of 20 percent of the fees 
                for professional services for the audit and review of 
the annual and interim financial statements, and in doing so, made a 
determination they were in the best interest of investors and disclosed 
that determination to the stockholders of the issuer.
                    (B) Implementation.--The Board may issue rules for 
                purposes of implementing this paragraph, and exempting 
                services provided by the auditor from its provision, if 
                the Board makes a finding that the services provided by 
                the auditor are in the best interests of investors and 
                will improve the quality of financial reporting and 
                independent audits.
            (3) Lack of auditor rotation.--The firm has served as the 
        auditor of an issuer for more than 7 consecutive years during 
        which the auditor issued its independent accountant's report on 
        the financial statements of the issuer. However, an accounting 
        firm shall be considered to be independent if after serving as 
        the auditor of the issuer for 7 consecutive years, it has not 
        issued its accountant's report on the financial statements of 
        the issuer for at least 2 consecutive years, subsequent to the 
        7-year term as auditor.
            (4) Transaction design and evaluation.--
                    (A) Advice or consultation.--With respect to any 
                transaction that is accounted for in the issuer's 
                audited or reviewed financial statements, and which is 
                included in the transactions on which the firm issues 
                its audit opinion or review report on the issuer's 
                financial statements, the firm--
                            (i) advised or consulted the issuer or an 
                        intermediary in the design or structuring of 
                        such transaction; or
                            (ii) provided the issuer or intermediary a 
                        report on the application of generally accepted 
                        accounting principles or Federal tax laws or 
                        regulations to the transaction.
                    (B) Exception.--The firm's independence shall not 
                be deemed to be impaired if the public accounting firm 
                provides, in the performance of an audit engagement, a 
                report to an audit client on the application of 
                generally accepted accounting principles or Federal tax 
                laws or regulations to a specific transaction on which 
                the auditor has not otherwise advised or consulted on 
                the design or structuring.
            (5) Not supervised by audit committee.--The firm is not 
        appointed by, and does not report directly to, the audit 
        committee of the board of directors, or, in the absence of an 
        audit committee, the board committee performing equivalent 
        functions or the entire board of directors.
    (b) Board Actions.--The Board shall seek to promote the 
independence of auditors by--
            (1) inspecting the compliance with professional standards 
        by public accounting firms registered with the Board, pursuant 
        to paragraphs (1), (2), and (3) of section 405(a); and
            (2) appropriately disciplining the firm or persons 
        associated with such firm in accordance with the provisions of 
        section 407 of this title for violations of provisions of this 
        title, the securities laws, the rules or regulations 
        thereunder, the rules adopted by the Board or professional 
        standards.

SEC. 407. INVESTIGATIONS AND DISCIPLINARY PROCEEDINGS.

    (a) Investigations and Disciplinary Proceedings.--The Board shall 
establish fair procedures for investigating and disciplining public 
accounting firms registered with the Board, and persons associated with 
such firms, for violations of this title, the securities laws, the 
rules or regulations thereunder, the rules adopted by the Board, or 
professional standards.
    (b) Investigation Procedures.--
            (1) General authority.--The Board may conduct an 
        investigation of any act or practice, or omission to act, by a 
        public accounting firm registered with the Board, or by any 
        person associated with such firm, that may violate any 
        applicable provision of this title, the securities laws, the 
        rules or regulations thereunder, the rules adopted by the 
        Board, or professional standards, whether such act, practice, 
        or omission is identified in a review conducted in accordance 
        with the provisions of section 405 of this title, is the 
        subject of a criminal, civil, or administrative action or 
        disciplinary proceeding, or otherwise is brought to the 
        attention of the Board. At the discretion of the Board, such an 
        investigation, in light of the circumstances, may relate to the 
        entire public accounting firm, to 1 or more persons associated 
        with the firm, or to 1 or more offices, engagements, or 
        transactions of such firm.
            (2) Incidental authority.--For purposes of an investigation 
        under this section, the Board may, in addition to such other 
        actions as the Board determines to be necessary or 
        appropriate--
                    (A) require the testimony of any person associated 
                with a public accounting firm registered with the 
                Board, with respect to any matter which the Board 
                considers relevant or material to the investigation;
                    (B) require the production of audit work papers and 
                of any other document or information in the possession 
                of a public accounting firm registered with the Board 
                or any person associated with such firm, wherever 
                domiciled, that the Board considers relevant or 
                material to the investigation, and may examine the 
                books and records of such firm to verify the accuracy 
                of any documents or information supplied; and
                    (C) require the testimony of, and production of any 
                document in the possession of, any person, including 
                any client of a public accounting firm registered with 
                the Board, that the Board considers relevant or 
                material to the investigation.
            (3) Sanctions.--Failure of any person to comply with the 
        requirements of this section shall be subject to the same 
        sanctions as are applicable for any failure to produce 
        information or testimony to the Commission in the course of a 
        formal investigation. In addition, the refusal of any person 
        associated with a public accounting firm registered with the 
        Board to testify, or the refusal of any such person, or of any 
        public accounting firm, to produce documents or otherwise 
        cooperate with the Board in connection with an investigation 
        under this section, shall be cause for the suspension or 
        revocation of registration of such public accounting firm, 
        suspending or barring such person from being associated with an 
        issuer or a public accounting firm registered with the Board, 
        or such other appropriate sanction as the Board shall 
        determine.
            (4) Referral to commission.--The Board may refer any other 
        investigation to the Commission as it deems appropriate. The 
        Commission shall evaluate any such matter referred to it by the 
        Board and shall take action with respect to the matter as it 
        deems necessary or appropriate.
            (5) Confidentiality of investigations.--
                    (A) Information confidential.--Except as provided 
                in subparagraph (B), all reports, memorandums, and 
                other information prepared or received by, and 
                deliberations of, the Board and its employees and 
                agents in connection with an investigation under this 
                section shall be confidential and privileged unless and 
until presented in connection with a public proceeding or the public 
release by the Board of its report of sanctions pursuant to subsection 
(d).
                    (B) Availability to other authorities.--All 
                information referred to in subparagraph (A) of this 
                paragraph--
                            (i) shall be available to--
                                    (I) the Commission and any other 
                                Federal department or agency;
                                    (II) the appropriate State 
                                licensing board or boards; and
                                    (III) Federal and State authorities 
                                in connection with any criminal 
                                investigation or proceeding; and
                            (ii) shall be admissible--
                                    (I) in any civil action brought by 
                                the Commission or any other Federal 
                                department or agency, or by any such 
                                State licensing board; and
                                    (II) in any criminal action.
                Nothing in this subsection shall authorize the Board to 
                withhold information from Congress.
                    (C) Relation to foia.--For purposes of section 552 
                of title 5, United States Code, this paragraph shall be 
                considered a statute described in section 552(b)(3)(B) 
                of such title.
            (6) Investigative immunity.--Any employee of the Board 
        engaged in carrying out an investigation under this section 
        shall be immune from any civil liability arising out of such 
        investigation in the same manner and to the same extent as an 
        employee of the Federal Government in similar circumstances.
    (c) Disciplinary Procedures.--
            (1) Notice and hearing.--In any proceeding by the Board to 
        determine whether a public accounting firm, or a person 
        associated with such firm, should be disciplined, the Board 
        shall bring specific charges, notify such firm or person of, 
        and give such persons or firm an opportunity to defend against, 
        such charges, and shall keep a record of the proceedings. All 
        hearings under this subsection shall be public unless otherwise 
        ordered by the Board on its own motion or after considering the 
        motion of a party.
            (2) Available remedies.--If the Board finds that a public 
        accounting firm, or persons associated with a public accounting 
        firm, has engaged in any act or practice, or omitted to act, in 
        violation of this title, the securities laws, the rules or 
        regulations thereunder, the rules adopted by the Board, or 
        professional standards, then the Board may impose such 
        disciplinary or remedial sanctions as it deems appropriate, 
        including--
                    (A) temporary or permanent revocation or suspension 
                of registration with the Board;
                    (B) temporary or permanent limitation of 
                activities, functions, or operations;
                    (C) civil money penalties;
                    (D) censure and, in the case of a person associated 
                with a public accounting firm, temporary or permanent 
                suspension or bar from being associated with any public 
                accounting firm registered with the Board; or
                    (E) any other appropriate sanction.
            (3) Authorized civil penalties.--
                    (A) Determination by board.--Subject to 
                subparagraphs (B) and (C), the Board may impose, and 
                shall determine the amount of, civil money penalties in 
                light of the facts and circumstances.
                    (B) In general.--For each violation, the amount of 
                the penalty shall not exceed the greater of $100,000 
                for a natural person or $2,000,000 for any other 
                persons.
                    (C) Increased penalties.--Notwithstanding 
                subparagraph (B), the amount of penalty for each such 
                violation shall not exceed the greater of $750,000 for 
                a natural person or $15,000,000 for any other persons, 
                if the violation involved fraud, deceit, manipulation, 
                or deliberate or reckless disregard of the regulatory 
                standard.
            (4) Statement of sanction.--A determination by the Board to 
        impose a disciplinary or remedial sanction shall be supported 
        by a statement setting forth--
                    (A) any act or practice in which such firm or 
                person associated with such firm has been found to have 
                engaged, or which such firm or person has been found to 
                have omitted;
                    (B) the specific provision of this title, the 
                securities laws, the rules or regulations thereunder, 
                the rules adopted by the Board, or professional 
                standards which any such act or practice, or omission 
                to act, is deemed to violate; and
                    (C) the sanction imposed and the reason for that 
                sanction.
            (5) Consequences of sanction.--
                    (A) Association with firms.--It shall be unlawful 
                for any person suspended or barred from being 
                associated with a public accounting firm registered 
                with the Board willfully to become or remain associated 
                with such a firm without the consent of the Board or 
                the Commission. It shall be unlawful for any public 
                accounting firm registered with the Board to permit 
                such a person to become or remain associated with such 
                a firm without the consent of the Board or the 
                Commission if such firm knew, or, in the exercise of 
                reasonable care should have known, of such suspension 
                or bar.
            (6) Association with issuers.--It shall be unlawful for any 
        person suspended or barred from being associated with an issuer 
        willfully to become, or remain associated with such an issuer 
        without the consent of the Board or the Commission. It shall be 
        unlawful for any issuer to permit such a person to become, or 
        remain a person associated with such issuer without the consent 
        of the Board or the Commission if such issuer knew, or, in the 
        exercise of reasonable care should have known, of such 
        suspension or bar.
    (d) Reporting of Sanctions.--
            (1) Reporting required.--Whenever the Board imposes a 
        disciplinary sanction against a public accounting firm or a 
        person associated with a public accounting firm or any other 
        person, the Board shall report the sanction to the Commission, 
        to the appropriate State or foreign licensing board or boards 
        with which such firm or person is licensed or certified to 
        practice public accounting, and to the public.
            (2) Information required.--The information required to be 
        reported shall include--
                    (A) the name of the public accounting firm, or 
                accountant associated with an issuer, against whom the 
                sanction is imposed;
                    (B) a description of the acts or practices, or 
                omissions to act, upon which the sanction is based;
                    (C) the nature of the sanction; and
                    (D) such other information respecting the 
                circumstances of the disciplinary action as the Board 
                deems appropriate.
            (3) Availability to public.--In order to make the 
        information required under paragraph (2) available to the 
        public, the Board shall--
                    (A) establish and maintain a toll-free telephone 
                listing and any other readily accessible electronic 
                process to receive inquiries regarding such 
                information; and
                    (B) respond promptly to such inquiries.

SEC. 408. SECURITIES AND EXCHANGE COMMISSION OVERSIGHT OF THE BOARD.

    (a) Proposed Rule Changes.--
            (1) Filing, publication, and comment.--The Board shall file 
        with the Commission, in accordance with such rules as the 
        Commission may prescribe, copies of any proposed rule or any 
        proposed change in, addition to, or deletion from the rules of 
        the Board (hereinafter collectively referred to as ``proposed 
        rule change'') accompanied by a concise general statement of 
        the basis and purpose of such proposed rule change. Upon the 
        filing of any proposed rule change, the Commission shall 
        publish a public notice of the proposed rule change together 
        with the terms and substance of the proposed rule change or a 
        description of the subjects and issues involved in the Federal 
        Register. The Commission shall give interested persons an 
        opportunity to submit written data, views, and arguments 
        concerning such proposed rule change. No proposed rule changes 
        shall take effect unless approved by the Commission or 
        otherwise permitted in accordance with the provisions of this 
        section.
            (2) Procedure.--
                    (A) Approval or institution of proceedings.--Within 
                35 days of the date of publication of notice of the 
                filing of a proposed rule change in accordance with 
                subsection (a)(1) of this section, or within such 
                longer period as the Commission may designate up to 90 
                days of such date if it finds such longer period to be 
                appropriate and publishes its reasons for so finding or 
                as to which the Board consents, the Commission shall--
                            (i) by order approve such proposed rule 
                        change; or
                            (ii) institute proceedings to determine 
                        whether the proposed rule change should be 
                        disapproved.
                    (B) Notice of grounds; approval or disapproval.--
                Such proceedings shall include notice of the grounds 
                for disapproval under consideration and opportunity for 
                hearing and be concluded within 180 days of the date of 
                publication of notice of the filing of the proposed 
                rule change. At the conclusion of such proceedings the 
                Commission, by order published in the Federal Register, 
                shall approve or disapprove such proposed rule change. 
                The Commission may extend the time for conclusion of 
                such proceedings for up to 60 days if it finds good 
                cause for such extension and publishes its reasons for 
                so finding or for such longer period as to which the 
                Board consents.
                    (C) Grounds for decision.--The Commission shall 
                approve a proposed rule change if it finds that such 
                proposed rule change is consistent with the 
                requirements of this title, the securities laws, and 
                the rules and regulations thereunder. The Commission 
                shall disapprove a proposed rule change if it does not 
                make such a finding. The Commission shall not approve 
                any proposed rule change prior to the 30th day after 
                the date of publication of notice of the filing 
                thereof, unless the Commission finds good cause for so 
                doing and publishes its reasons for so doing.
            (3) Rules effective upon filing.--
                    (A) Rules permitted.--Notwithstanding the 
                provisions of paragraph (2) of this subsection, a 
                proposed rule change may take effect upon filing with 
                the Commission if designated by the Board as--
                            (i) constituting a stated policy, practice, 
                        or interpretation with respect to the meaning, 
                        administration, or enforcement of an existing 
                        rule of the Board;
                            (ii) establishing or changing a fee, or 
                        other charge imposed by the Board; or
                            (iii) concerned solely with the 
                        administration of the Board or other matters 
                        which the Commission, by rule, consistent with 
                        the public interest and the purposes of this 
                        section, may specify as outside the provisions 
                        of such paragraph (2).
                    (B) Authority.--Notwithstanding any other provision 
                of this section, a proposed rule change may be put into 
                effect summarily if it appears to the Commission, after 
                consultation with the Board, or the Board after 
                consultation with the Commission, that such action is 
                necessary for the protection of investors. Any proposed 
                rule change so put into effect shall be filed promptly 
                thereafter in accordance with the provisions of 
                paragraph (1) of this subsection.
                    (C) Limitation on effect.--Any proposed rule change 
                that has taken effect pursuant to subparagraph (A) or 
                (B) of this paragraph may be enforced by the Board to 
                the extent it is not inconsistent with the provisions 
                of this title, the securities laws, the rules and 
                regulations thereunder, the rules adopted by the Board, 
                and other applicable Federal and State law.
                    (D) Abrogation.--At any time within 60 days of the 
                date of filing of such a proposed rule change in 
                accordance with the provisions of this paragraph, the 
                Commission summarily may abrogate the change in the 
                rules of the Board made thereby and require that the 
                proposed rule change be refiled in accordance with the 
                provisions of paragraph (2) of this subsection, if it 
                appears to the Commission that such action is necessary 
                or appropriate in the public interest, for the 
                protection of investors, or otherwise in furtherance of 
                the purposes of this title or the securities laws. 
                Commission action pursuant to the preceding sentence 
                shall not affect the validity or force of the rule 
                change during the period it was in effect and shall not 
                be reviewable under section 25 of the Securities 
                Exchange Act of 1934 nor deemed to be ``final agency 
                action'' for purposes of section 704 of title 5, United 
                States Code.
    (b) Power of the Commission To Amend Rules of the Board.--The 
Commission, by rule or order, may abrogate, add to, and delete from 
(hereinafter collectively referred to as ``amend'') the rules of the 
Board as the Commission deems necessary or appropriate to assure the 
fair administration of the Board, to conform its rules to the 
requirements of this title, the securities laws, and the rules and 
regulations thereunder applicable to the Board, and otherwise in 
furtherance of the purposes of this title or the securities laws, in 
the following manner:
            (1) Notice.--The Commission shall notify the Board and 
        publish notice of the proposed rulemaking in the Federal 
        Register. The notice shall include the text of the proposed 
        amendment to the rules of the Board and a statement of the 
        Commission's reasons, including the pertinent facts, for 
        commencing such proposed rulemaking.
            (2) Comment.--The Commission, at its discretion, may give 
        interested persons an opportunity for the oral presentation of 
        data, views, and arguments, in addition to an opportunity to 
        make written submissions. A transcript shall be kept of any 
        oral presentation.
            (3) Text of rule and statement.--A rule adopted pursuant to 
        this subsection shall incorporate the text of the amendment to 
        the rules of the Board and a statement of the Commission's 
        basis for and purpose in so amending such rules. The statement 
        shall include an identification of any facts on which the 
        Commission considers its determination to amend the rules of 
        the Board to be based, including the reasons for the 
        Commission's conclusions as to any of such facts that were 
        disputed in the rulemaking.
            (4) Additional provisions.--
                    (A) Administrative procedure.--Except as provided 
                in paragraphs (1) through (3) of this subsection, 
                rulemaking under this subsection shall be in accordance 
                with the procedures specified in section 553 of title 
                5, United States Code, for rulemaking not on the 
                record.
                    (B) Preservation of commission authority.--Nothing 
                in this subsection shall be construed to impair or 
                limit the Commission's power to make, or to modify or 
                alter the procedures the Commission may follow in 
                making rules and regulations pursuant to any other 
authority under this title or the securities laws.
            (C) Rule of construction.--Any amendment to the rules of 
        the Board made by the Commission pursuant to this subsection 
        shall be considered for all purposes of this title and the 
        securities laws to be part of the rules of the Board and shall 
        not be considered to be a rule of the Commission.
    (c) Commission Review of Disciplinary Action Taken by the Board.--
            (1) Notice to commission.--If the Board imposes any final 
        disciplinary or remedial sanction on any public accounting firm 
        registered with the Board or on any person associated with a 
        public accounting firm registered with the Board, the Board 
        shall promptly file notice thereof with the Commission. The 
        notice shall be in such form and contain such information as 
        the Commission, by rule, may prescribe as necessary or 
        appropriate in furtherance of the purposes of this title and 
        the securities laws.
            (2) Commission authority to review.--Any action with 
        respect to which the Board is required by paragraph (1) of this 
        subsection to file notice shall be subject to review by the 
        Commission, on its own motion, or upon application by any 
        person aggrieved thereby filed within 30 days after the date 
        such notice was filed with the Commission and received by such 
        aggrieved person, or within such longer period as the 
        Commission may determine. Application to the Commission for 
        review, or the institution of review by the Commission on its 
        own motion, shall not operate as a stay of such action unless 
        the Commission otherwise orders, summarily or after notice and 
        opportunity for hearing on the question of a stay (which 
        hearing may consist solely of the submission of affidavits or 
        presentation of oral arguments). The Commission shall establish 
        for appropriate cases an expedited procedure for consideration 
        and determination of the question of a stay.
    (d) Disposition of Review; Cancellation, Reduction, or Remission of 
Sanction.--
            (1) Authority to affirm, modify, or set aside.--In any 
        proceeding to review a final disciplinary or remedial sanction 
        imposed by the Board on a public accounting firm registered 
        with the Board or a person associated with such a firm, after 
        notice and opportunity for hearing (which hearing may consist 
        solely of consideration of the record before the Board and 
        opportunity for presentation of supporting reasons to affirm, 
        modify, or set aside the sanction)--
                    (A) if the Commission finds that such firm or 
                person associated with such a firm has engaged in such 
                acts or practices, or has omitted such acts, as the 
                Board has found him or her to have engaged in or 
                omitted, that such acts or practices, or omissions to 
                act, are in violation of such provisions of this title, 
                the securities laws, the rules or regulations 
                thereunder, the rules adopted by the Board, or 
                professional standards as have been specified in the 
                determination of the Board, and that such provisions 
                are and were applied in a manner consistent with the 
                purposes of this title and the securities laws, then 
                the Commission, by order, shall so declare and, as 
                appropriate, affirm the sanction imposed by the Board, 
                modify the sanction in accordance with paragraph (2) of 
                this subsection, or remand to the Board for further 
                proceedings; or
                    (B) if the Commission does not make any such 
                finding it shall, by order, set aside the sanction 
                imposed by the Board and, if appropriate, remand to the 
                Board for further proceedings.
            (2) Alteration of sanction.--If the Commission, having due 
        regard for the public interest and the protection of investors, 
        finds after a proceeding in accordance with paragraph (1) of 
        this subsection that a sanction imposed by the Board upon such 
        firm or person associated is inadequate or inappropriate in 
        light of the nature of the violation and the purposes of the 
        securities laws, or is excessive or oppressive, the Commission 
        may enhance, modify, cancel, reduce, or require the remission 
        of such sanction.
    (e) Board Compliance With Rules and Regulations.--
            (1) Compliance.--The Board shall comply with the provisions 
        of this title, the securities laws, the rules and regulations 
        thereunder, and its own rules and (subject to the provisions of 
        paragraph (2) of this subsection and the rules thereunder) 
        absent reasonable justification or excuse enforce compliance 
        with such provisions and with professional standards by public 
        accounting firms registered with the Board and persons 
        associated with such firms.
            (2) Commission relief from compliance.--The Commission, by 
        rule, consistent with the public interest, the protection of 
        investors, and the other purposes of this title and the 
        securities laws, may relieve the Board of any responsibility 
        under this title to enforce compliance with any specified 
        provision of this title, the securities laws, the rules or 
        regulations thereunder, or professional standards by any public 
        accounting firm registered with the Board or person associated 
        with such a firm, or any class of such firms or persons 
        associated with such firms if the Commission--
                    (A) finds that relieving the Board of such 
                responsibility is necessary in the public interest and 
                for the protection of investors; and
                    (B) the Commission assumes the responsibility for 
                enforcing such compliance.
    (f) Censure of the Board; Other Sanctions.--
            (1) Commission authority over board.--The Commission is 
        authorized, by order, if in its opinion such action is 
        necessary or appropriate in the public interest, for the 
        protection of investors, or otherwise in furtherance of the 
        purposes of this title or the securities laws, to censure or 
        impose limitations upon the activities, functions, and 
        operations of the Board, if the Commission finds, on the record 
after notice and opportunity for a hearing, that the Board has violated 
or is unable to comply with any provision of this title, the securities 
laws, the rules or regulations thereunder, or its own rules or without 
reasonable justification or excuse has failed to enforce compliance 
with any such provision or any professional standard by a public 
accounting firm registered with the Board or a person associated with 
such a firm.
            (2) Commission authority to sanction members.--The 
        Commission is authorized, if in its opinion such activity is 
        necessary or appropriate in the public interest, for the 
        protection of investors, or otherwise in furtherance of the 
        purposes of this title or the securities laws, to remove from 
        office or censure any member of the Board, if the Commission 
        finds, on the record after notice and opportunity for a 
        hearing, that such member has willfully violated any provision 
        of this title, the securities laws, the rules or regulations 
        thereunder, or the rules of the Board, willfully abused his or 
        her authority, or without reasonable justification or excuse 
        has failed to enforce compliance with any such provision or any 
        professional standard by any public accounting firm registered 
        with the Board or any person associated with such a firm.

SEC. 409. FOREIGN PUBLIC ACCOUNTING FIRMS.

    (a) Applicability.--Any foreign public accounting firm that 
furnishes an independent accountant's report with respect to any 
financial statement, report, or other document required to be filed 
with the Commission under the securities laws shall be subject to the 
provisions of this title in the same manner and to the same extent as a 
domestic public accounting firm.
    (b) Exemptions.--Notwithstanding subsection (a), the Commission or 
Board may, by rule, regulation, or order and as it deems consistent 
with the public interest and the protection of investors, either 
unconditionally or upon specified terms and conditions--
            (1) exempt any foreign public accounting firm, or any class 
        of such firms, from 1 or more provisions of this title; or
            (2) impose additional qualifications on any foreign public 
        accounting firm, or any class of such firms, to assure such 
        firm's knowledge of professional standards in the United States 
        and that such firm has adequate procedures in place to assure 
        compliance with those professional standards.
    (c) Liaison.--The Board may, as it deems necessary, consult, 
liaise, and meet with accounting professionals and regulators in other 
countries.

SEC. 410. TRANSITION.

    Any person previously associated with a public accounting firm and 
in the position of chief executive officer, chief financial officer, 
controller or principal accounting officer, or any equivalent positions 
of an issuer prior to the enactment of this Act, shall not impair the 
independence of an accounting firm under section 406(a)(1). Until 1 
year from the date of the enactment of this Act, providing those 
services set forth in section 406(a)(2) will not impair the 
independence of a public accounting firm, if performing those services 
did not otherwise previously impair the firm's independence under 
preexisting requirements of the Commission or professional standards. 
Paragraphs (3) and (4) of section 406(a) shall not apply until 5 years 
from the enactment of this Act. Section 406(a)(5) shall not apply to 
audits commenced prior to the date of the enactment of this Act.

                   TITLE V--PRESERVATION OF AUTHORITY

SEC. 501. SECURITIES AND EXCHANGE COMMISSION AUTHORITY NOT IMPAIRED.

    Nothing in this Act shall be construed to impair or limit the 
Securities and Exchange Commission's authority over the accounting 
profession, accounting firms, or persons associated with such firms, or 
to set standards for accounting or auditing practices or auditor 
independence, derived from other provisions of the securities laws (as 
such term is defined in section 3(a)(47) of the Securities Exchange Act 
of 1934) or the rules or regulations thereunder, or the Commission's 
ability to take, on its own initiative, legal, administrative, or 
disciplinary action against any public accounting firm registered with 
the Board or any person associated with such a firm.
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