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