Sarbanes Oxley Act Section 101

 

SEC. 101. ESTABLISHMENT; ADMINISTRATIVE PROVISIONS.
 
(a) ESTABLISHMENT OF BOARD.—There is established the Public
Company Accounting Oversight Board, to oversee the audit of public
companies that are subject to the securities laws, and related matters,
in order to protect the interests of investors and further
the public interest in the preparation of informative, accurate,
and independent audit reports for companies the securities of which
are sold to, and held by and for, public investors. The Board shall
be a body corporate, operate as a nonprofit corporation, and have
succession until dissolved by an Act of Congress.
 
(b) STATUS.—The Board shall not be an agency or establishment of the United States Government, and, except as otherwise provided in this Act, shall be subject to, and have all the powers conferred upon a nonprofit corporation by, the District of Columbia Nonprofit Corporation Act.
 
No member or person employed by, or agent for,
the Board shall be deemed to be an officer or employee of or
agent for the Federal Government by reason of such service.
 
(c) DUTIES OF THE BOARD.—The Board shall, subject to action
by the Commission under section 107, and once a determination
is made by the Commission under subsection (d) of this section—
 
(1) register public accounting firms that prepare audit
reports for issuers, in accordance with section 102;
 
(2) establish or adopt, or both, by rule, auditing, quality
control, ethics, independence, and other standards relating to
the preparation of audit reports for issuers, in accordance with
section 103;
 
(3) conduct inspections of registered public accounting
firms, in accordance with section 104 and the rules of the
Board;
 
(4) conduct investigations and disciplinary proceedings concerning,
and impose appropriate sanctions where justified upon,
such firms, in accordance with section 105;
 
(5) perform such other duties or functions as the Board
(or the Commission, by rule or order) determines are necessary
or appropriate to promote high professional standards among,
and improve the quality of audit services offered by, registered
public accounting firms and associated persons thereof, or otherwise
to carry out this Act, in order to protect investors, or
to further the public interest;
 
(6) enforce compliance with this Act, the rules of the Board,
professional standards, and the securities laws relating to the
preparation and issuance of audit reports and the obligations
and liabilities of accountants with respect thereto, by registered
public accounting firms and associated persons thereof; and
 
(7) set the budget and manage the operations of the Board
and the staff of the Board.
 
(d) COMMISSION DETERMINATION.—The members of the Board
shall take such action (including hiring of staff, proposal of rules,
and adoption of initial and transitional auditing and other professional
standards) as may be necessary or appropriate to enable
the Commission to determine, not later than 270 days after the
date of enactment of this Act, that the Board is so organized
and has the capacity to carry out the requirements of this title,
and to enforce compliance with this title by registered public
accounting firms and associated persons thereof. The Commission
shall be responsible, prior to the appointment of the Board, for
the planning for the establishment and administrative transition
to the Board’s operation.
 
(e) BOARD MEMBERSHIP.—
(1) COMPOSITION.—The Board shall have 5 members,
appointed from among prominent individuals of integrity and
reputation who have a demonstrated commitment to the
interests of investors and the public, and an understanding
of the responsibilities for and nature of the financial disclosures
required of issuers under the securities laws and the obligations
of accountants with respect to the preparation and issuance
of audit reports with respect to such disclosures.
 
(2) LIMITATION.—Two members, and only 2 members, of
the Board shall be or have been certified public accountants
pursuant to the laws of 1 or more States, provided that, if
1 of those 2 members is the chairperson, he or she may not
have been a practicing certified public accountant for at least
5 years prior to his or her appointment to the Board.
 
(3) 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 person
or engage in any other professional or business activity. No
member of the Board may share in any of the profits of,
or receive payments from, a public accounting firm (or any
other person, as determined by rule of the Commission), other
than fixed continuing payments, subject to such conditions as
the Commission may impose, under standard arrangements
for the retirement of members of public accounting firms.
 
(4) APPOINTMENT OF BOARD MEMBERS.—
 
(A) INITIAL BOARD.—Not later than 90 days after the
date of enactment of this Act, the Commission, after consultation
with the Chairman of the Board of Governors
of the Federal Reserve System and the Secretary of the
Treasury, shall appoint the chairperson and other initial
members of the Board, and shall designate a term of service
for each.
 
(B) VACANCIES.—A vacancy on the Board shall not
affect the powers of the Board, but shall be filled in the
same manner as provided for appointments under this
section.
 
(5) TERM OF SERVICE.—
 
(A) IN GENERAL.—The term of service of each Board
member shall be 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, 1 on each of the first 4 anniversaries of
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, or as chairperson of the Board,
for more than 2 terms, whether or not such terms of
service are consecutive.
 
(6) REMOVAL FROM OFFICE.—A member of the Board may
be removed by the Commission from office, in accordance with
section 107(d)(3), for good cause shown before the expiration
of the term of that member.
 
(f) POWERS OF THE BOARD.—In addition to any authority
granted to the Board otherwise in this Act, the Board shall have
the power, subject to section 107—
 
(1) to sue and be sued, complain and defend, in its corporate
name and through its own counsel, with the approval of the
Commission, in any Federal, State, or other court;
 
(2) to conduct its operations and maintain offices, and
to exercise all other rights and powers authorized by this Act,
in any State, without regard to any qualification, licensing,
or other provision of law in effect in such State (or a political
subdivision thereof);
 
(3) to lease, purchase, accept gifts or donations of or otherwise
acquire, improve, use, sell, exchange, or convey, all of
or an interest in any property, wherever situated;
 
(4) to appoint such employees, accountants, attorneys, and
other agents as may be necessary or appropriate, and to determine
their qualifications, define their duties, and fix their
salaries or other compensation (at a level that is comparable
to private sector self-regulatory, accounting, technical, supervisory,
or other staff or management positions);
 
(5) to allocate, assess, and collect accounting support fees
established pursuant to section 109, for the Board, and other
fees and charges imposed under this title; and
 
(6) to enter into contracts, execute instruments, incur liabilities,
and do any and all other acts and things necessary,
appropriate, or incidental to the conduct of its operations and
the exercise of its obligations, rights, and powers imposed or
granted by this title.
 
(g) RULES OF THE BOARD.—The rules of the Board shall, subject
to the approval of the Commission—
 
(1) provide for the operation and administration of the
Board, the exercise of its authority, and the performance of
its responsibilities under this Act;
 
(2) permit, as the Board determines necessary or appropriate,
delegation by the Board of any of its functions to an
individual member or employee of the Board, or to a division
of the Board, including functions with respect to hearing, determining,
ordering, certifying, reporting, or otherwise acting as
to any matter, except that—
 
(A) the Board shall retain a discretionary right to
review any action pursuant to any such delegated function,
upon its own motion;
 
(B) a person shall be entitled to a review by the Board
with respect to any matter so delegated, and the decision
of the Board upon such review shall be deemed to be
the action of the Board for all purposes (including appeal
or review thereof); and
 
(C) if the right to exercise a review described in
subparagraph (A) is declined, or if no such review is sought
within the time stated in the rules of the Board, then
the action taken by the holder of such delegation shall
for all purposes, including appeal or review thereof, be
deemed to be the action of the Board;
 
(3) establish ethics rules and standards of conduct for Board
members and staff, including a bar on practice before the
Board (and the Commission, with respect to Board-related matters)
of 1 year for former members of the Board, and appropriate
periods (not to exceed 1 year) for former staff of the Board; and
 
(4) provide as otherwise required by this Act.
 
(h) ANNUAL REPORT TO THE COMMISSION.—The Board shall
submit an annual report (including its audited financial statements)
to the Commission, and the Commission shall transmit a copy
of that report to the Committee on Banking, Housing, and Urban
Affairs of the Senate, and the Committee on Financial Services
of the House of Representatives, not later than 30 days after the
date of receipt of that report by the Commission.

 
   

 

 

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