[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 2247 Introduced in Senate (IS)]







107th CONGRESS
  2d Session
                                S. 2247

 To provide for the regulation of public accounting firms for purposes 
of the Federal securities laws, to promote quality and transparency in 
 financial reporting, to improve the quality of independent audits and 
accounting services through an Independent Public Accounting Oversight 
                     Board, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 24, 2002

  Mr. Durbin introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
 To provide for the regulation of public accounting firms for purposes 
of the Federal securities laws, to promote quality and transparency in 
 financial reporting, to improve the quality of independent audits and 
accounting services through an Independent Public Accounting Oversight 
                     Board, and for other purposes.

    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 in Auditing 
Act of 2002''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Purposes.
Sec. 3. Definitions.
         TITLE I--INDEPENDENT PUBLIC ACCOUNTING OVERSIGHT BOARD

Sec. 101. Designation of Independent Public Accounting Oversight Board.
Sec. 102. Administrative rules of the Board.
Sec. 103. Duties of the Board.
Sec. 104. Securities and Exchange Commission oversight of the Board.
                      TITLE II--AUDITOR STANDARDS

Sec. 201. Registration of public accounting firms.
Sec. 202. Auditor independence.
Sec. 203. Investigations and disciplinary proceedings.
Sec. 204. Foreign public accounting firms.
Sec. 205. Certification required.
Sec. 206. Commission rules and enforcement.

SEC. 2. PURPOSES.

    The purposes of this Act are to provide for--
            (1) the designation of an Independent Public Accounting 
        Board, subject to oversight by the Securities and Exchange 
        Commission;
            (2) the registration of public accounting firms that 
        prepare audit reports regarding financial statements, reports, 
        or other documents required to be filed with the Commission 
        under the securities laws;
            (3) the establishment of rules regarding quality control 
        and auditing standards that are designed to improve the quality 
        of the audits conducted by public accounting firms;
            (4) public and private enforcement of such rules and 
        methods of a continuing inspection program of the accounting 
        and auditing practices of registered public accounting firms; 
        and
            (5) investigation of and discipline of such firms and 
        persons associated with such firms, who violate--
                    (A) this Act;
                    (B) the securities laws;
                    (C) the rules of the Board; or
                    (D) professional standards.

SEC. 3. DEFINITIONS.

    In this Act, the following definitions shall apply:
            (1) Appropriate state regulatory authority.--With respect 
        to a registered public accounting firm or associated person 
        thereof, the term ``appropriate State regulatory authority'' 
        means the State agency or other authority responsible for the 
        licensure or other regulation of the practice of accounting in 
        the State having jurisdiction over the firm or associated 
        person.
            (2) Audit committee.--The term ``audit committee'' means a 
        committee (or equivalent body) of the board of directors of an 
        issuer with responsibility for board oversight of the financial 
        reporting, internal accounting controls, independent audits, 
        and financial statements of the issuer, and, where applicable, 
        the internal audit functions of the issuer, or a committee of 
        the board of directors having equivalent functions, or, if no 
        such committee exists with respect to an issuer, the entire 
        board of directors of the issuer.
            (3) Audit report.--The term ``audit report'' means a 
        document or other record--
                    (A) prepared in connection with auditing services 
                performed for any issuer for purposes of compliance by 
                the issuer with the requirements of the securities 
                laws; and
                    (B) in which a registered public accounting firm--
                            (i) sets forth the opinion of that firm 
                        regarding a financial statement, report, or 
                        other document; or
                            (ii) asserts that no such opinion can be 
                        expressed.
            (4) Audit services.--The term ``audit services'' means any 
        professional service provided by a registered public accounting 
        firm or an associated person thereof, to an issuer in 
        connection with the preparation or issuance of an audit report, 
        or a review of the financial statements of an issuer in 
        accordance with professional standards.
            (5) Board.--The term ``Board'' means the entity designated 
        as the Independent Public Accounting Oversight Board pursuant 
        to section 101.
            (6) Commission.--The term ``Commission'' means the 
        Securities and Exchange Commission.
            (7) Issuer.--The term ``issuer'' has the same meaning as in 
        section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 
        78c).
            (8) Intermediary.--The term ``intermediary'' means those 
        parties who may advise 1 or more principals to a transaction, 
        and may include attorneys and investment, merchant, and 
        commercial bankers.
            (9) Non-audit services.--The term ``non-audit services'' 
        means any professional services provided to an issuer by a 
        registered public accounting firm or an associated person 
        thereof, other than those provided to an issuer in connection 
        with the preparation or issuance of an audit report or a review 
        of the financial statements of an issuer in accordance with 
        professional standards.
            (10) Person associated with a public accounting firm.--The 
        terms ``person associated with a public accounting firm'' and 
        ``associated person of a public accounting firm'' mean any 
        individual proprietor, partner, shareholder, principal, 
or professional employee of that firm, or any other natural person or 
other entity associated with that firm, that--
                    (A) shares in the profits of that firm; or
                    (B) engages in any conduct or practice by that firm 
                in connection with the preparation or issuance of any 
                audit report or the provision of any audit service.
            (11) 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 that the Board or the Commission determines, by 
        rule--
                    (A) relate to the preparation of financial 
                statements or audit reports, or to auditor ethics and 
                independence; and
                    (B) are promulgated as rules of the Board or by a 
                standard setting body generally recognized or endorsed 
                by the Board, subject to the approval of the 
                Commission.
            (12) 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 audit reports; and
                    (B) to the extent so designated by the rules of the 
                Board, any associated person of an entity described in 
                subparagraph (A).
            (13) Registered public accounting firm.--The term 
        ``registered public accounting firm'' means a firm registered 
        with the Board in accordance with this Act.
            (14) Rules of the board.--The term ``rules of the Board'' 
        means the bylaws, rules, stated policies, standards, practices, 
        interpretations, and other instruments of the Board that the 
        Commission, by rule, may determine to be necessary or 
        appropriate in the public interest or for the protection of 
        investors to be deemed to be rules of the Board.
            (15) Securities.--The term ``securities'' has the same 
        meaning as in section 3 of the Securities Exchange Act of 1934 
        (15 U.S.C. 78c).
            (16) Securities laws.--The term ``securities laws'' has the 
        same meaning as in section 3(a) of the Securities Exchange Act 
        of 1934 (15 U.S.C. 78c(a)).
            (17) State.--The term ``State'' means any State of the 
        United States, the District of Columbia, Puerto Rico, the 
        Virgin Islands, or any other territory or possession of the 
        United States.

         TITLE I--INDEPENDENT PUBLIC ACCOUNTING OVERSIGHT BOARD

SEC. 101. DESIGNATION OF INDEPENDENT PUBLIC ACCOUNTING OVERSIGHT BOARD.

    (a) Designation of the Board.--Not later than 180 days after the 
date of enactment of this Act, the Commission shall designate an entity 
that meets the requirements of this Act and the rules of the Commission 
issued under this Act as the Independent Public Accounting Oversight 
Board, which shall be a self-regulatory entity, subject to the 
oversight of the Commission, as provided in this Act and applicable 
law.
    (b) Private Status of the Board.--The Board, as designated under 
this section, shall not, for any purpose, be an agency or 
instrumentality of the Federal Government, and no officer, employee, 
member of the Board, or other person associated with the Board shall 
be, for any purpose, an officer or employee of the Federal Government.
    (c) Designation Procedures.--Application by any entity or 
organization for designation under subsection (a) shall be in such form 
and subject to such procedures as the Commission may require, as 
necessary or appropriate in the public interest or for the protection 
of investors.

SEC. 102. ADMINISTRATIVE RULES OF THE BOARD.

    (a) Board Membership.--
            (1) Appointments.--The Board shall be comprised of 5 
        members, appointed from among prominent individuals of 
        integrity and reputation who have a demonstrated commitment to 
        the interests of investors and the public.
            (2) Limitation.--Not more than 2 members of the Board may 
        be, on or before the date of appointment, or at any time during 
        service on the Board, certified public accountants.
            (3) Exclusions.--No member of the Board may--
                    (A) concurrent with service on the Board, be 
                engaged in the public practice of accounting;
                    (B) during the 3-year period preceding the date of 
                appointment to the Board, be an associated person of a 
                public accounting firm; or
                    (C) share in any of the profits of, or receive 
                payments from, a public accounting firm.
            (4) Full-time, independent service.--Each member of the 
        Board shall serve on a full-time basis, and may not, concurrent 
        with service on the Board, be employed by any other entity.
            (5) Term of service.--
                    (A) In general.--Each term of service of a member 
                of the Board shall be for 5 years, and until a 
                successor is appointed, except that--
                            (i) the terms of office of the initial 
                        Board members (other than the Chairperson) 
                        shall expire in annual increments, as 
                        determined by the Commission at the time of 
                        designation of the Board under section 4, 
                        resulting in--
                                    (I) 1 term expiring 1 year after 
                                the initial date of appointment;
                                    (II) 1 term expiring 2 years after 
                                the initial date of appointment;
                                    (III) 1 term expiring 3 years after 
                                the initial date of appointment; and
                                    (IV) 1 term expiring 4 years after 
                                the initial date of appointment; and
                            (ii) any Board member appointed to fill a 
                        vacancy occurring before the expiration of the 
                        term for which the predecessor was appointed 
                        shall be appointed only for the remainder of 
                        that term.
                    (B) Term limitation.--No person may serve as a 
                member of the Board for more than 2 terms.
            (6) Appointment committee.--A 3-person appointment 
        committee, composed of the Chairperson of the Board, the 
        Comptroller General of the United States, and the Chairman of 
        the Commission (or the designee of the Chairman), shall appoint 
        new members to the Board for each vacancy arising after the 
        initial designation of the Board.
            (7) Removal from office.--A member of the Board may be 
        removed from office for cause before the expiration of the term 
        of that member--
                    (A) by a majority vote of the other members of the 
                Board, subject to the rules of the Board and the 
                approval of the Commission; or
                    (B) by the Commission under section 104(f)(3).
            (8) Vacancies.--A vacancy on the Board shall not affect its 
        powers, but shall be filled in the same manner as provided for 
        appointments under this section.
            (9) Chairperson of the board.--The Chairperson of the 
        Board--
                    (A) shall be selected by the Comptroller General of 
                the United States and the chairperson of the Commission 
                (or the designee of the chairperson), from among the 
                members of the Board who were not, on or before the 
                date of appointment to the Board, or at any time during 
                service on the Board, certified public accountants; and
                    (B) shall serve in such capacity for not longer 
                than two 5-year terms.
    (b) Rules of the Board.--The rules of the Board shall--
            (1) provide for the operation and administration of the 
        Board, including the appointment of members and the Chairperson 
        of the Board, as required by subsection (a);
            (2) provide for the appointment and compensation of such 
        accountants, attorneys, employees, and consultants as may be 
        necessary or appropriate to carry out the functions of the 
        Board in accordance with this Act;
            (3) establish procedures for the registration of public 
        accounting firms in accordance with this Act;
            (4) establish procedures for the Board to enter into 
        contracts, incur expenses, and take such other actions as may 
        be necessary or appropriate for the Board to perform its duties 
        under this Act;
            (5) establish the compensation of members of the Board at a 
        level comparable to similar professional positions in the 
        private sector, subject to annual review and approval by the 
        Commission; and
            (6) provide as otherwise required by this Act.
    (c) Annual Report.--
            (1) Submission to the commission.--The Board shall submit 
        an annual report and proposed budget to the Commission for 
        review and approval, at such times and in such form as the 
        Commission may reasonably require.
            (2) Contents.--Each report required by paragraph (1) shall 
        include a detailed description of the activities of the Board, 
        its audited financial statements, and such other matters as the 
        Board or the Commission considers appropriate.
            (3) Transmittal to congress.--The Commission shall transmit 
        each report received under this subsection to Congress.

SEC. 103. DUTIES OF THE BOARD.

    (a) Establishment of Quality Control, Independence, and Auditing 
Standards.--The rules of the Board shall establish, and provide for the 
enforcement of, such standards of auditor quality control, 
independence, and auditing standards, to be used by registered public 
accounting firms in the preparation and issuance of audit reports, as 
required by this Act and the rules of the Commission, and as may be 
necessary or appropriate in the public interest or for the protection 
of investors.
    (b) Inspections.--
            (1) In general.--The rules of the Board shall require the 
        Board to conduct a continuing program of inspections of each 
        registered public accounting firm, to assess compliance by that 
        firm, and by associated persons of that firm, with this Act, 
        the rules of the Board and the Commission, and professional 
        standards.
            (2) Inspection frequency.--Inspections required by this 
        subsection 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 not more than 
                100 issuers.
            (3) Procedure.--The Board shall, with respect to each 
        inspection required by this subsection--
                    (A) identify any act or practice, or omission to 
                act, by the registered public accounting firm, or by 
                any associated person thereof, that the Board 
                determines may be in violation of this Act, the rules 
                of the Board or the Commission, or professional 
                standards; and
                    (B) report any such act, practice, or omission to 
                the Commission, the Attorney General of the United 
                States, and the appropriate State regulatory authority 
                for appropriate referral, investigation, and action.
            (4) Conduct of inspections.--In conducting inspections 
        under this subsection, the Board shall--
                    (A) inspect selected audit and review engagements 
                of the registered public accounting firm, performed at 
                various offices and by various associated persons of 
                the firm;
                    (B) evaluate the sufficiency of the quality control 
                system in place at the registered public accounting 
                firm;
                    (C) determine whether the policies and procedures 
                of the registered public accounting firm have been 
                adequately documented and communicated to its employees 
                and other associated persons of the firm;
                    (D) assess whether the level of compliance with the 
                policies and procedures of the registered public 
                accounting firm is sufficient to reasonably assure 
                conformity with professional standards; and
                    (E) determine compliance by the registered public 
                accounting firm with professional accounting, auditing, 
                and independence and ethics standards.
            (5) Record retention.--To facilitate inspections required 
        under this section, the rules of the Board shall address the 
        retention of records by registered public accounting firms, 
        including--
                    (A) which records are to be created and retained;
                    (B) the required retention period for each record 
                identified under subparagraph (A); and
                    (C) the physical location where such records shall 
                be stored.
            (6) Report.--The Board shall prepare a written report of 
        its findings for each inspection under this subsection, which 
        report shall be--
                    (A) accompanied by any letter or comments by the 
                Board or the inspector, and any letter of response from 
                the registered public accounting firm under review;
                    (B) transmitted to the Commission;
                    (C) transmitted to the appropriate State regulatory 
                authority for appropriate referral, investigation, and 
                action; and
                    (D) made available to the public.
    (c) Penalties.--The rules of the Board shall--
            (1) provide for disciplinary actions for registered public 
        accounting firms and associated persons thereof, in accordance 
        with rules required by section 203, for violations of this Act, 
        the rules of the Board or the Commission, or professional 
        standards; and
            (2) establish procedures for notification of any such 
        disciplinary action to the Commission, the Attorney General of 
        the United States, and the appropriate State regulatory 
        authority for appropriate referral, investigation, and action.
    (d) Other Duties.--The Board shall perform such other duties or 
functions as the Commission determines are necessary or appropriate in 
the public interest or for the protection of investors, and to carry 
out the purposes of this Act.

SEC. 104. SECURITIES AND EXCHANGE COMMISSION OVERSIGHT OF THE BOARD.

    (a) General Oversight Responsibility.--The Commission shall have 
oversight and enforcement authority over the Board, as provided in this 
Act.
    (b) Rules of the Board.--
            (1) Definition.--In this section, the term ``proposed 
        rule'' means any proposed rule of the Board, and any change to, 
        modification of, addition to, or deletion from any rule of the 
        Board.
            (2) Prior approval required.--No rule of the Board required 
        by this Act shall become effective without approval of the 
        Commission in accordance with the requirements of this section, 
        except as specifically authorized in this section.
            (3) Filing with the commission.--The Board shall file with 
        the Commission, in accordance with such rules as the Commission 
        may prescribe, and before the effective date of any proposed 
        rule, copies of the proposed rule, accompanied by a concise 
        general statement of the basis and purpose of the proposed 
        rule.
            (4) Publication of notice.--Not later than 60 days after 
        the date of receipt of a filing of any proposed rule under 
        paragraph (3), the Commission shall publish a public notice of 
        the proposed rule, together with the terms and substance of the 
        proposed rule or a description of the subjects and issues 
        involved, in the Federal Register.
            (5) Opportunity for comment.--The Commission shall provide 
        to interested persons an opportunity to submit written data, 
        views, and arguments concerning any proposed rule of the Board.
            (6) Commission consideration.--No proposed rule may take 
        effect unless approved by the Commission, or otherwise 
        permitted in accordance with the provisions of this section.
            (7) Timing.--
                    (A) Initial commission decision.--Not later than 35 
                days after the date of publication of notice of a 
                proposed rule in accordance with paragraph (4), the 
                Commission shall--
                            (i) by order, approve the proposed rule; or
                            (ii) institute proceedings under paragraph 
                        (9) to determine whether the proposed rule 
                        should be disapproved.
                    (B) Authority to extend period.--The 35-day period 
                referred to in subparagraph (A) may be extended by the 
                Commission to not more than 90 days after the date of 
                publication of notice under paragraph (4), upon consent 
                of the Board or upon a finding of the Commission that 
                such longer period is necessary or appropriate, and 
                publication of its reasons for that finding.
            (8) Criteria for commission determination.--The Commission 
        shall--
                    (A) approve a proposed rule, if the Commission 
                finds that the proposed rule is consistent with the 
                requirements of this Act and the securities laws, or is 
                necessary or appropriate in the public interest or for 
                the protection of investors; and
                    (B) disapprove a proposed rule if it does not make 
                a finding described in subparagraph (A), in accordance 
                with paragraph (9).
            (9) Disapproval procedures.--
                    (A) Notice and hearing.--If the Commission 
                institutes proceedings under paragraph (7)(A)(ii), the 
                Commission shall--
                            (i) notify the Board and other interested 
                        parties of the grounds for disapproval of the 
                        proposed rule;
                            (ii) provide to the Board and other 
                        interested parties an opportunity for hearing; 
                        and
                            (iii) not later than 180 days after the 
                        date of publication of notice under paragraph 
                        (4), conclude the proceedings and, by order 
                        published in the Federal Register, approve or 
                        disapprove the proposed rule, except that the 
                        Commission may extend such time period for up 
                        to 60 days if it finds good cause for such 
                        extension and publishes its reasons for that 
                        finding, or for such longer period as to which 
                        the Board consents.
            (10) Effective dates.--
                    (A) In general.--A proposed rule approved by the 
                Commission under this subsection shall take effect not 
                earlier than 30 days after the date of publication of 
                notice under paragraph (4), unless the Commission finds 
                good cause for an earlier effective date and publishes 
                its reasons for that finding.
                    (B) Expedited applicability.--
                            (i) Rule effective upon filing.--
                        Notwithstanding subparagraph (A), a proposed 
                        rule may take effect upon the date of receipt 
                        of a filing with the Commission under paragraph 
                        (3), if the Board designates the proposed rule 
                        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 Act, may exempt 
                                from the requirements of subparagraph 
                                (A).
                            (ii) Protection of investors.--
                        Notwithstanding any other provision of this 
                        subsection, a proposed rule may be put into 
                        effect immediately if the Commission 
                        determines, after consultation with the Board, 
                        or the Board determines, after consultation 
                        with the Commission, that such action is 
                        necessary for the protection of investors. A 
                        proposed rule subject to treatment under this 
                        subparagraph shall be filed with the Commission 
                        promptly in accordance with paragraph (3).
                            (iii) Rule enforcement.--Any proposed rule 
                        that has taken effect under this subparagraph 
                        may be enforced by the Board to the extent that 
                        it is not inconsistent with this Act, the 
                        securities laws, the rules of the Commission, 
                        and other applicable Federal law.
            (11) Rule abrogation.--
                    (A) General authority.--Notwithstanding any other 
                provision of this section, or any other provision of 
                law, during the 60-day period following the date of 
                receipt of the filing of a proposed rule under 
                paragraph (3), the Commission may abrogate any proposed 
                rule and require that the proposed rule be refiled in 
                accordance with paragraph (3), if the Commission 
                determines 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 Act or the securities laws.
                    (B) Procedure.--Commission action under this 
                subparagraph--
                            (i) shall not affect the validity or force 
                        of the subject rule during any period for which 
                        it was in effect;
                            (ii) shall not be reviewable under section 
                        25 of the Securities Exchange Act of 1934 (15 
                        U.S.C. 78y); and
                            (iii) shall not be a final agency action 
                        for purposes of section 704 of title 5, United 
                        States Code.
    (c) Power of the Commission To Amend Rules of the Board.--
            (1) In general.--The Commission, by rule or order, may 
        amend the rules of the Board (including the abrogation, 
        addition to, or deletion from such rules), as the Commission 
        determines necessary or appropriate to--
                    (A) assure the fair administration of the Board;
                    (B) conform the rules promulgated by the Board to 
                the requirements of this Act and the securities laws; 
                and
                    (C) otherwise further the purposes of this Act or 
                the securities laws.
            (2) Notice.--The Commission shall notify the Board and 
        publish notice of a proposed rulemaking under this subsection 
        in the Federal Register, which notice shall include the text of 
        the proposed amendment to the rules of the Board and a 
        statement of the reasons of the Commission, including the 
        pertinent facts, for commencing such proposed rulemaking.
            (3) Hearing.--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, with respect to an action under this 
subsection. A transcript shall be kept of any such oral presentation.
            (4) Statement of basis and purpose.--A rule adopted under 
        this subsection shall incorporate the text of the amendment to 
        the rules of the Board and a statement by the Commission on its 
        basis for and purpose in so amending such rules, including 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 conclusions of the Commission as 
        to any facts that were disputed in the rulemaking.
            (5) Clarifications.--
                    (A) Not on the record.--Except as provided in 
                paragraphs (1) through (4), 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) No impact on commission rulemaking authority.--
                Nothing in this subsection shall be construed to impair 
                or limit the authority of the Commission to make, 
                modify, or alter the procedures that the Commission may 
                follow in making rules and regulations under any other 
                authority under this Act or the securities laws.
                    (C) Effect of commission amendments to board 
                rules.--Any amendment to the rules of the Board made by 
                the Commission under this subsection shall be 
                considered for all purposes of this Act 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.
    (d) Commission Review of Disciplinary Action Taken by the Board.--
            (1) Notice of sanction.--If the Board imposes any final 
        disciplinary or remedial sanction on any registered public 
        accounting firm or on any associated person of a registered 
        public accounting firm, the Board shall promptly file notice 
        thereof with the Commission, in such form and containing such 
        information as the Commission, by rule, may prescribe as 
        necessary or appropriate in furtherance of the purposes of this 
        Act and the securities laws.
            (2) Review of sanction.--
                    (A) In general.--Any sanction described in 
                paragraph (1) shall be subject to review by the 
                Commission, on its own motion, or upon application by 
                any person aggrieved thereby.
                    (B) Application for review.--An application for 
                review of a sanction described in paragraph (1) shall 
                be filed not later than 30 days after the date on which 
                the aggrieved person was notified of the sanction by 
                the Board, or within such longer period as the 
                Commission may determine appropriate.
                    (C) Review does not suspend sanction.--An 
                application to the Commission for review of a sanction 
                described in paragraph (1), or the institution of 
                review by the Commission on its own motion, shall not 
                operate as a stay of the sanction, unless the 
                Commission otherwise orders, summarily or after notice 
                and opportunity for hearing on the question of a stay. 
                Such hearing may consist solely of the submission of 
                affidavits or presentation of oral arguments. The 
                Commission shall establish an expedited procedure, in 
                appropriate cases, for consideration and determination 
                of the question of a stay.
    (e) Disposition of Review.--
            (1) Notice and hearing.--In any proceeding to review a 
        final disciplinary or remedial sanction imposed by the Board on 
        a registered public accounting firm or an associated person 
        thereof, the firm or person shall be provided with notice and 
        an opportunity for hearing. The hearing may consist solely of 
        consideration of the record before the Board and an opportunity 
        to present supporting reasons to affirm, modify, or set aside 
        the sanction.
            (2) Affirmation.--The Commission shall, by order, affirm a 
        sanction imposed by the Board, if the Commission finds that--
                    (A) the sanctioned registered public accounting 
                firm or associated person has engaged in such acts or 
                practices, or has omitted to act, as the Board has 
                found that person to have engaged in or omitted;
                    (B) such acts or practices, or omissions to act, 
                are in violation of any provision of this Act, the 
                securities laws, the rules of the Board, or 
                professional standards, as have been specified in the 
                determination of the Board; and
                    (C) such provisions, laws, rules, or standards were 
                applied with respect to the registered public 
                accounting firm or associated person in a manner 
consistent with the purposes of this Act and the securities laws.
            (3) Modification.--If the Commission, having due regard for 
        the public interest and the protection of investors, finds 
        after a proceeding in accordance with this subsection that a 
        sanction imposed by the Board upon a registered public 
        accounting firm or associated person thereof imposes a burden 
        that is not necessary or appropriate in furtherance of the 
        purposes of this Act or the securities laws, or is excessive or 
        oppressive, the Commission may modify, cancel, or require the 
        remission of the sanction.
            (4) Cancellation.--If the Commission does not make a 
        finding consistent with paragraph (2) or (3), it shall, by 
        order, set aside the sanction imposed by the Board and, if 
        appropriate, remand to the Board for further proceedings.
    (f) Board Compliance and Enforcement.--
            (1) Compliance.--The Board shall comply with this Act, the 
        securities laws, the rules of the Commission, and the rules of 
        the Board.
            (2) Enforcement.--Absent reasonable justification or 
        excuse, the Board shall enforce compliance with this Act, the 
        rules of the Board or the Commission, and professional 
        standards by registered public accounting firms and associated 
        persons thereof.
    (g) Censure of the Board; Other Sanctions.--
            (1) Rescission of board authority.--The Commission, by 
        rule, consistent with the public interest, the protection of 
        investors, and the purposes of this Act and the securities 
        laws, may relieve the Board of any responsibility under this 
        Act to enforce compliance with any provision of this Act, the 
        securities laws, the rules of the Board or the Commission, or 
        professional standards by any registered public accounting firm 
        or associated person thereof, or any class of such firms or 
        persons associated with such firms.
            (2) Censure of the board; limitations.--The Commission may, 
        by order, as it determines necessary or appropriate in the 
        public interest, for the protection of investors, or otherwise 
        in furtherance of the purposes of this Act or the securities 
        laws, 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--
                    (A) has violated or is unable to comply with any 
                provision of this Act, the securities laws, or the 
                rules of the Board; or
                    (B) without reasonable justification or excuse, has 
                failed to enforce compliance with any such provision or 
                rule, or any professional standard by a registered 
                public accounting firm or an associated person thereof.
            (3) Censure of board members; removal from office.--If the 
        Commission determines that an activity is necessary or 
        appropriate in the public interest, for the protection of 
        investors, or otherwise in furtherance of the purposes of this 
        Act or the securities laws, the Commission may 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--
                    (A) has willfully violated any provision of this 
                Act, the securities laws, or the rules of the Board;
                    (B) has willfully abused the authority of that 
                member; or
                    (C) without reasonable justification or excuse, has 
                failed to enforce compliance with any such provision or 
                rule, or any professional standard by any registered 
                public accounting firm or any associated person 
                thereof.

                      TITLE II--AUDITOR STANDARDS

SEC. 201. REGISTRATION OF PUBLIC ACCOUNTING FIRMS.

    (a) Mandatory Registration With the Board.--Beginning 1 year after 
the date of the designation of the Board under section 101, it shall be 
unlawful for any person to prepare or furnish, an audit report with 
respect to any issuer, unless that person--
            (1) is a registered public accounting firm;
            (2) is in compliance with this Act and all applicable rules 
        of the Board and the Commission; and
            (3) has paid all applicable registration and annual fees 
        under this title.
    (b) Application for Registration.--A public accounting firm may 
become registered under this title upon application to the Board, in 
such form and containing such information as the Board, by rule, may 
prescribe.
    (c) Contents of Applications.--Each application by a public 
accounting firm for registration under this title shall include--
            (1) the names of all of the issuers for which the firm 
        prepares or furnishes audit reports;
            (2) for each such issuer, the annual fees received by the 
        firm from that issuer relating to--
                    (A) performance of any annual audit or quarterly 
                interim review of the financial statements of the 
                issuer to be filed in an audit report with the 
                Commission under the securities laws;
                    (B) other accounting and audit services;
                    (C) tax services;
                    (D) information technology consulting services; and
                    (E) all other consulting or advisory services, in 
                such detail as the rules of the Board shall specify;
            (3) financial information of the firm for the most recent 
        fiscal year, including the total annual revenues, assets, 
        liabilities, and net equity of the firm, and the aggregate 
        revenues from each of the accounting, auditing, tax, and other 
        professional services provided to any issuer;
            (4) the names of any liability insurance carrier of the 
        firm;
            (5) a copy of the policies and procedures of the firm with 
        respect to quality control of its accounting and auditing 
        practices;
            (6) a list of all persons associated with the firm, the 
        license or certification number of each such person issued by 
        the appropriate State regulatory authority, and a brief 
        statement of the education and experience of each such person;
            (7) information relating to criminal, civil, or 
        administrative actions or disciplinary proceedings pending 
        against the firm or any associated person of the firm in 
        connection with any audit report furnished by the firm;
            (8) a list of issuers for which the firm has been appointed 
        as a successor auditor in the most recently completed fiscal 
        year, and where unresolved disagreements exist between the 
        successor and predecessor auditor on the application of 
        generally accepted accounting principles, including a detailed 
        description of the nature of any such disagreement; and
            (9) such other information as the rules of the Board or the 
        Commission shall specify as necessary or appropriate in the 
        public interest or for the protection of investors.
    (d) Approval or Denial of Applications.--The Board shall approve or 
deny a completed application for registration under this section, not 
later than 60 days after the date of receipt of the application, or 
such longer time as the Board may require, in accordance with the rules 
of the Board.
    (e) Registration and Annual Fees.--
            (1) In general.--The Board shall assess and collect a 
        registration fee and annual dues from each registered public 
        accounting firm, subject to annual review and approval by the 
        Commission.
            (2) Amounts.--
                    (A) In general.--Fees and dues under paragraph (1) 
                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.
                    (B) Basis of fees.--The amount of fees and dues for 
                each registered public accounting firm shall be based 
                upon--
                            (i) the annual revenues of that firm from 
                        accounting, auditing, and other professional 
                        services provided to issuers for the purpose of 
                        preparing or furnishing any audit report;
                            (ii) the number of persons associated with 
                        the firm that prepare, assist, or otherwise 
                        participate in the preparation of audit 
                        reports;
                            (iii) the number of issuers for which the 
                        firm prepares or furnishes any audit report; 
                        and
                            (iv) such other criteria as the rules of 
                        the Board may establish.
    (f) Special Fees.--The Board may prescribe and collect fees that 
fairly reflect the costs to the Board of conducting inspections and 
disciplinary actions in accordance with this Act, in addition to other 
fees authorized by this section.
    (g) Periodic Reports.--
            (1) Annual reports.--Each registered public accounting firm 
        shall submit an annual report to the Board--
                    (A) to update the information contained in its 
                application for registration under this section; and
                    (B) to provide to the Board any additional 
                information that the Board may require, in accordance 
                with the rules of the Board.
            (2) Updates.--Not later than 15 days after an event that 
        affects any information referred to in paragraph (7) or (8) of 
        subsection (c), or more frequently as the Board may require, 
        each registered public accounting firm shall provide to the 
        Board any relevant information with respect to such matters.
            (3) Public availability.--Annual reports required by this 
        subsection, or parts thereof, as designated by the rules of the 
        Board or the Commission, shall be made available for public 
        inspection.
    (h) Commission Exemption Authority.--The Commission, by rule or 
order, upon its own motion or upon application, may conditionally or 
unconditionally exempt any public accounting firm or any audit report, 
or any class of public accounting firms or any class of audit reports, 
from any provision of this Act, if the Commission finds that such 
exemption is consistent with the public interest, the protection of 
investors, and the purposes of this Act.

SEC. 202. AUDITOR INDEPENDENCE.

    (a) In General.--It shall be unlawful for any registered public 
accounting firm or any associated person of a registered public 
accounting firm to prepare, or contribute to the preparation of, any 
audit report with respect to any issuer--
            (1) if the chief executive officer, chief financial 
        officer, controller, or principal accounting officer of the 
        issuer, or any person acting in an equivalent position for the 
        issuer, was an associated person of the registered public 
        accounting firm--
                    (A) at any time after the date of enactment of this 
                Act, effective during the 3-year period beginning on 
                the date of enactment of this Act; or
                    (B) at any time during the 3-year period preceding 
                the provision of any such audit services, effective 
                beginning 3 years after the date of enactment of this 
                Act;
            (2) effective 1 year after the date of enactment of this 
        Act (and during that 1-year period, in any case in which the 
        Commission finds that the independence of a registered public 
        accounting firm would otherwise be jeopardized), if the non-
        audit services provided to that issuer by the registered public 
        accounting firm were not approved in writing by the audit 
        committee of the issuer, based on a determination that such 
        non-audit services were in the best interest of investors, and 
        after disclosure by the issuer of that determination to the 
        shareholders of the issuer in each report required to be made 
        by the issuer to such shareholders;
            (3) effective 5 years after the date of enactment of this 
        Act, during more than 5 consecutive calendar years--
                    (A) unless the Board, upon review at the end of 
                each such 5-year period of the audit reports prepared 
                for that issuer by the registered public accounting 
                firm or associated person (pursuant to the rules of the 
                Board), approves continuation of services for that 
                issuer by the firm or associated person; or
                    (B) if, at the end of each such 5-year period, 
                there is pending, or during such 5-year period there 
                became final, any sanction by the Commission with 
                respect to the registered public accounting firm or 
                associated person;
            (4) effective on and after the date of enactment of this 
        Act, if the registered public accounting firm--
                    (A) advises or consults with an issuer or an 
                intermediary in the design or structuring of a specific 
                transaction that is accounted for in the audited or 
                reviewed financial statements of the issuer;
                    (B) provides to the issuer or an intermediary a 
                report on the application of generally accepted 
                accounting principles to a transaction described in 
                subparagraph (A); and
                    (C) prepares or furnishes any audit report or 
                opinion or review of the financial statements of the 
                issuer that include such transaction; or
            (5) if the public accounting firm does not report directly 
        to the audit committee of the issuer or directly to the board 
        of directors of the issuer with respect to any audit services 
        commenced on or after the date of enactment of this Act.
    (b) Board Rules and Enforcement.--
            (1) Document retention; concurrent review.--The rules of 
        the Board shall require each registered public accounting 
        firm--
                    (A) to 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 the audit 
                report;
                    (B) to provide a concurring or second partner 
                review of such audit workpapers and other related 
                information by a qualified person (as prescribed by the 
                Board) associated with the registered public accounting 
                firm, other than the person in charge of the audit, or 
                by an independent reviewer (as prescribed by the 
                Board); and
                    (C) to secure the concurring approval of such 
                qualified person or independent reviewer as a necessary 
                prerequisite to the issuance of any audit report.
            (2) Independence policies and procedures.--The rules of the 
        Board with respect to auditor independence for registered 
        public accounting firms shall include, among such other 
        requirements as the Board may prescribe, policies and 
        procedures for--
                    (A) monitoring by each such firm of its 
                professional ethics, including the independence of the 
                firm from the issuers for which the firm prepares or 
                furnishes any audit report;
                    (B) the assignment of personnel to audit 
                engagements;
                    (C) consultation within the firm or with other 
                accountants on accounting and auditing questions;
                    (D) the supervision of audit work;
                    (E) the hiring, professional development, and 
                advancement of personnel;
                    (F) the acceptance and continuation of issuers as 
                clients; and
                    (G) internal inspection of the compliance of the 
                firm with such policies and procedures.
            (3) Exemption authority.--The rules of the Board shall 
        provide for--
                    (A) the implementation of the requirements of this 
                section with respect to registered public accounting 
                firms and associated persons thereof; and
                    (B) the exemption of services by a registered 
                public accounting firm from the requirements of this 
                section, if the Board determines that the exemption is 
                in the best interests of investors and will improve the 
                quality of financial reporting and the independence of 
                audits under the securities laws.
            (4) Enforcement.--The rules of the Board shall establish 
        disciplinary procedures applicable to any registered public 
        accounting firm or associated person thereof in accordance with 
        section 203, for violation of any provision of this Act, the 
        securities laws, the rules of the Board or the Commission, or 
        professional standards.
    (c) Rule of Construction.--Nothing in this section or the rules of 
the Board shall be construed to prohibit a registered public accounting 
firm that issues an audit report to an issuer from providing an opinion 
to that issuer regarding the application of generally accepted 
accounting principles to, or the design and structure of, a specific 
transaction on which the registered public accounting firm has not 
otherwise advised or consulted with the issuer.
    (d) Commission Rulemaking.--The Commission shall promulgate such 
rules and regulations relating to the independence of registered public 
accounting firms, consistent with this title, as may be necessary or 
appropriate in the public interest or for the protection of investors.

SEC. 203. INVESTIGATIONS AND DISCIPLINARY PROCEEDINGS.

    (a) Investigations and Disciplinary Proceedings.--The rules of the 
Board shall establish fair procedures for investigating and 
disciplining registered public accounting firms and associated persons 
thereof for violations of this Act, the securities laws, the rules of 
the Board or the Commission, or professional standards.
    (b) Investigation Procedures.--
            (1) Authority.--In accordance with the rules of the Board, 
        the Board may conduct an investigation of any act or practice, 
        or omission to act, by a registered public accounting firm, or 
        by any associated person of a registered public accounting 
        firm, that may violate any provision of this Act, the 
        securities laws, the rules of the Board or the Commission, or 
        professional standards, regardless of how the act, practice, or 
        omission 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 registered public 
        accounting firm, to 1 or more persons associated with the firm, 
        or to 1 or more offices, engagements, or transactions of the 
        firm.
            (2) Compulsion of testimony and document production.--For 
        purposes of an investigation under this section, and in 
        addition to such other actions as the Board determines to be 
        necessary or appropriate, the rules of the Board may--
                    (A) require the testimony of any person associated 
                with a registered public accounting firm, with respect 
                to any matter that the Board considers relevant or 
                material to the investigation;
                    (B) require the production of audit workpapers and 
                of any other document or information in the possession 
                of a registered public accounting firm or any 
                associated person thereof, wherever domiciled, that the 
                Board considers relevant or material to the 
                investigation, and may examine the books and records of 
                such firm or associated person 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 issuer client of a registered public accounting 
                firm, that the Board considers relevant or material to 
                an investigation under this section.
            (3) Penalties for noncompliance with investigation.--
                    (A) In general.--Any person who fails 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.
                    (B) Refusal to cooperate.--If a registered public 
                accounting firm or any associated person thereof 
                refuses to testify, produce documents, or otherwise 
                cooperate with the Board in connection with an 
                investigation under this section, the Board may--
                            (i) suspend or bar such person from being 
                        associated with an issuer or a registered 
                        public accounting firm;
                            (ii) suspend or revoke the registration of 
                        the public accounting firm; and
                            (iii) invoke such other sanctions as the 
                        Board considers appropriate.
            (4) Referrals.--The Board may refer any investigation to 
        the Commission, the Attorney General of the United States, and 
        the appropriate State regulatory authority for appropriate 
        referral, investigation, and action, as the Board determines 
        appropriate.
            (5) Use of documents.--
                    (A) Confidentiality.--Except as provided in 
                subparagraph (B), all reports, memoranda, 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 under subsection (d).
                    (B) Availability to government agencies.--All 
                information referred to in subparagraph (A) shall be--
                            (i) made available to the Commission, the 
                        Attorney General of the United States, and any 
                        other Federal department or agency, to any 
                        appropriate State regulatory authority (which 
                        shall maintain such information as confidential 
                        and privileged, subject to otherwise applicable 
                        law), and to Federal and State authorities in 
                        connection with any criminal investigation or 
                        proceeding;
                            (ii) admissible in any action brought by 
                        the Commission, the Attorney General of the 
                        United States, or any other Federal department 
                        or agency, or by any appropriate State 
                        regulatory authority, and in any criminal 
                        action; and
                            (iii) made available to Congress, upon 
                        request, subject to otherwise applicable law.
            (6) Government immunity.--Any employee of the Board engaged 
        in carrying out an investigation under this Act 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) Notification; recordkeeping.--The rules of the Board 
        shall provide that in any proceeding by the Board to determine 
        whether a registered public accounting firm or an associated 
        person thereof, should be disciplined, the Board shall--
                    (A) bring specific charges with respect to the firm 
                or associated person;
                    (B) notify such firm or associated person of, and 
                provide to the firm or associated person an opportunity 
                to defend against, such charges; and
                    (C) keep a record of the proceedings.
            (2) Public hearings.--All hearings under this section shall 
        be public, unless otherwise ordered by the Board on its own 
        motion or after considering the motion of a party.
            (3) Sanctions.--If the Board finds that a registered public 
        accounting firm, or a person associated with a registered 
        public accounting firm, has engaged in any act or practice, or 
        omitted to act, in violation of this Act, the securities laws, 
        the rules of the Board or the Commission, or professional 
        standards, the Board may impose such disciplinary or remedial 
        sanctions as it determines appropriate, including--
                    (A) temporary or permanent revocation or suspension 
                of registration under this title with the Board;
                    (B) temporary or permanent limitation of 
                activities, functions, or operations;
                    (C) civil money penalties;
                    (D) censure;
                    (E) in the case of an associated person of a 
                registered public accounting firm, temporary or 
                permanent suspension or bar from being associated with 
                any registered public accounting firm; and
                    (F) any other appropriate sanction, subject to the 
                approval of the Commission.
            (4) Civil money penalties.--
                    (A) Board determination.--Civil money penalties for 
                a violation of this Act, the securities laws, the rules 
                of the Board or the Commission, or professional 
                standards, if any, shall be determined by the Board, 
                based on the facts and circumstances.
                    (B) In general.--For each violation of this Act, 
                the securities laws, the rules of the Board or the 
                Commission, or professional standards, the amount of a 
                penalty imposed under subparagraph (A) may not exceed 
                the greater of--
                            (i) $100,000 for a natural person; or
                            (ii) $2,000,000 for any person other than a 
                        natural person.
                    (C) Fraud.--Notwithstanding subparagraph (B), the 
                amount of a penalty for each violation described in 
                subparagraph (B) that involves fraud, deceit, 
                manipulation, or deliberate or reckless disregard of 
                the regulatory standard, may not exceed the greater 
                of--
                            (i) $750,000 for a natural person; or
                            (ii) $15,000,000 for any person other than 
                        a natural person.
            (5) Supporting statement.--A determination by the Board to 
        impose a disciplinary or remedial sanction or penalty under 
        this section shall be supported by a statement setting forth--
                    (A) any prohibited act or practice in which the 
                registered public accounting firm, or associated person 
                of such firm, has engaged, or any required act or 
                practice which such firm or person has omitted;
                    (B) the specific provision of this Act, the 
                securities laws, the rules of the Board or the 
                Commission, or professional standards which the Board 
                determines has been violated; and
                    (C) the sanction imposed, including a justification 
                for that sanction.
            (6) Effect of suspension.--
                    (A) Association with a public accounting firm.--
                            (i) Suspended or barred persons.--It shall 
                        be unlawful for any person that is suspended or 
                        barred from being associated with a registered 
                        public accounting firm in accordance with this 
                        section willfully to become or remain 
                        associated with a registered public accounting 
                        firm without the consent of the Board or the 
                        Commission.
                            (ii) Registered public accounting firms.--
                        It shall be unlawful for any registered public 
                        accounting firm to permit a person that is 
                        suspended or barred from being associated with 
                        any such firm in accordance with this section 
                        to become or remain associated with that firm 
                        without the consent of the Board or the 
                        Commission, if the firm knew, or, in the 
                        exercise of reasonable care should have known, 
                        of the suspension or bar.
                    (B) Association with an issuer.--
                            (i) Suspended or barred persons.--It shall 
                        be unlawful for any person that is suspended or 
                        barred from being associated with an issuer in 
                        accordance with this section willfully to 
                        become or remain associated with such an issuer 
                        without the consent of the Board or the 
                        Commission.
                            (ii) Issuers.--It shall be unlawful for any 
                        issuer to permit any person that is suspended 
                        or barred from being associated with an issuer 
                        in accordance with this section to become or 
                        remain an associated person of that issuer 
                        without the consent of the Board or the 
                        Commission, if the issuer knew, or, in the 
                        exercise of reasonable care should have known, 
                        of the suspension or bar.
    (d) Reporting of Sanctions.--
            (1) Recipients.--Whenever the Board imposes a disciplinary 
        sanction or penalty against a registered public accounting 
        firm, an associated person of a registered public accounting 
        firm, or any other person in accordance with this section, the 
        Board shall report the sanction to--
                    (A) the Commission;
                    (B) any appropriate State regulatory authority or 
                foreign licensing board having similar authority with 
                which such firm or person is licensed or certified to 
                practice public accounting for appropriate referral, 
                investigation, and action;
                    (C) the Attorney General of the United States for 
                appropriate referral, investigation, and action; and
                    (D) the public.
            (2) Contents.--The information required to be reported 
        under paragraph (1) shall include--
                    (A) the name of the registered public accounting 
                firm or other person against whom the sanction or 
                penalty is imposed;
                    (B) a description of the acts or practices, or 
                omissions to act, upon which the sanction or penalty is 
                based;
                    (C) the nature of the sanction; and
                    (D) such other information respecting the 
                circumstances of the disciplinary sanction or penalty 
                as the Board determines appropriate.

SEC. 204. FOREIGN PUBLIC ACCOUNTING FIRMS.

    (a) In General.--Any foreign public accounting firm that prepares 
or furnishes, or assists or otherwise participates in the preparation 
of, an audit report with respect to any issuer, shall be subject to 
this Act, the rules and regulations of the Commission, and the rules of 
the Board issued in accordance with this Act, in the same manner and to 
the same extent as a public accounting firm that is organized and 
operates under the laws of the United States or any State.
    (b) Authority To Exempt or Add Qualifications.--The Commission, and 
the Board, subject to the approval of the Commission, may, by rule, 
regulation, or order, and as the Commission (or Board) determines 
necessary or appropriate in the public interest or for 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 any provision of this Act, the rules and 
        regulations of the Commission, and the rules of the Board 
        issued in accordance with this Act; and
            (2) impose requirements or qualifications in addition to 
        those required by this Act and such rules or regulations on any 
        foreign public accounting firm, or any class of such firms, to 
        ensure that such firm possesses adequate knowledge of 
        professional standards in the United States, and that such firm 
        has adequate policies and procedures in place to assure 
        compliance with those professional standards.
    (c) Authority To Consult.--The Board may, as the Board determines 
necessary, consult, liaison, and meet with accounting professionals and 
regulators in other countries for purposes of this section.
    (d) Definition.--In this section, the term ``foreign public 
accounting firm'' means a public accounting firm that is organized and 
operates under the laws of a foreign government or political 
subdivision thereof.

SEC. 205. 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.--Each annual or periodic financial report filed under this 
title and transmitted to shareholders shall include, in accordance with 
such rules as the Commission may prescribe, a certified statement 
addressed to the shareholders of the issuer and signed by the chief 
executive officer and chief financial officer of the issuer, that 
attests that--
            ``(1) the financial statements contained in the report 
        (including the balance sheet, income statement, cash flow 
        statement, and accompanying footnote disclosures) have been 
        prepared by management of the issuer;
            ``(2) by signing the report, the officers believe and 
        affirm that the financial statements are fairly presented, and 
        are presented in plain language, in a manner designed to give 
        shareholders a complete understanding of the financial 
        condition, results of operations, and cash flow of the issuer, 
        with full and fair disclosure and transparency; and
            ``(3) the signing officers believe and affirm--
                    ``(A) their responsibility for establishing and 
                maintaining an adequate internal control structure and 
                procedures for financial reporting; and
                    ``(B) the assessment of the signing officers, for 
                the most recent fiscal year of the issuer, of the 
                effectiveness of such internal control structure and 
                procedures.''.

SEC. 206. COMMISSION RULES AND ENFORCEMENT.

    (a) Regulatory Action.--The Commission shall promulgate such rules 
and regulations relating to the independence of registered public 
accounting firms and associated persons thereof, consistent with this 
title, as may be necessary or appropriate in the public interest or for 
the protection of investors.
    (b) Enforcement.--A violation by any person of this title, any rule 
or regulation of the Commission issued under this title, or any rule of 
the Board shall be treated for all purposes in the same manner as a 
violation of the Securities Exchange Act of 1934, or the rules and 
regulations issued thereunder, and any such person shall be subject to 
the same penalties, and to the same extent as for a violation of that 
Act or such rules or regulations.
    (c) Effect on Commission Authority.--Nothing in this Act or the 
rules of the Board shall be construed to impair or limit--
            (1) the authority of the Commission to regulate the 
        accounting profession, accounting firms, or persons associated 
        with such firms for purposes of enforcement of the securities 
        laws;
            (2) the authority of the Commission to set standards for 
        accounting or auditing practices or auditor independence 
        derived from other provisions of the securities laws or the 
        rules or regulations issued thereunder, for purposes of the 
        preparation and issuance of any auditor report, or otherwise 
        under applicable law; or
            (3) the ability of the Commission to take, on the 
        initiative of the Commission, legal, administrative, or 
        disciplinary action against any registered public accounting 
        firm or any associated person thereof.
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