Sarbanes Oxley Act Section 103

 

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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