15 U.S.C. § 7213 — Auditing, quality control, and independ-

Page 2323 TITLE 15—COMMERCE AND TRADE § 7213 (C) such other current financial informa- tion for the most recently completed fiscal year of the firm as the Board may reason- ably request; (D) a statement of the quality control poli- cies of the firm for its accounting and audit- ing practices; (E) a list of all accountants associated with the firm who participate in or con- tribute to the preparation of audit reports, stating the license or certification number of each such person, as well as the State li- cense numbers of the firm itself; (F) 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; (G) copies of any periodic or annual disclo- sure filed by an issuer, broker, or dealer with the Commission during the immediately pre- ceding calendar year which discloses ac- counting disagreements between such issuer, broker, or dealer and the firm in connection with an audit report furnished or prepared by the firm for such issuer, broker, or dealer; and (H) such other information as the rules of the Board or the Commission shall specify as necessary or appropriate in the public inter- est or for the protection of investors. (3) Consents Each application for registration under this subsection shall include— (A) a consent executed by the public ac- counting firm to cooperation in and compli- ance with any request for testimony or the production of documents made by the Board in the furtherance of its authority and re- sponsibilities under this subchapter (and an agreement to secure and enforce similar con- sents from each of the associated persons of the public accounting firm as a condition of their continued employment by or other as- sociation with such firm); and (B) a statement that such firm under- stands and agrees that cooperation and com- pliance, as described in the consent required by subparagraph (A), and the securing and enforcement of such consents from its asso- ciated persons, in accordance with the rules of the Board, shall be a condition to the con- tinuing effectiveness of the registration of the firm with the Board. (c) Action on applications (1) Timing The Board shall approve a completed appli- cation for registration not later than 45 days after the date of receipt of the application, in accordance with the rules of the Board, unless the Board, prior to such date, issues a written notice of disapproval to, or requests more in- formation from, the prospective registrant. (2) Treatment A written notice of disapproval of a com- pleted application under paragraph (1) for reg- istration shall be treated as a disciplinary sanction for purposes of sections 7215(d) and 7217(c) of this title. (d) Periodic reports Each registered public accounting firm shall submit an annual report to the Board, and may be required to report more frequently, as nec- essary to update the information contained in its application for registration under this sec- tion, and to provide to the Board such additional information as the Board or the Commission may specify, in accordance with subsection (b)(2). (e) Public availability Registration applications and annual reports required by this subsection, or such portions of such applications or reports as may be des- ignated under rules of the Board, shall be made available for public inspection, subject to rules of the Board or the Commission, and to applica- ble laws relating to the confidentiality of pro- prietary, personal, or other information con- tained in such applications or reports, provided that, in all events, the Board shall protect from public disclosure information reasonably identi- fied by the subject accounting firm as propri- etary information. (f) Registration and annual fees The Board shall assess and collect a registra- tion fee and an annual fee from each registered public accounting firm, in amounts that are suf- ficient to recover the costs of processing and re- viewing applications and annual reports. (Pub. L. 107–204, title I, § 102, July 30, 2002, 116 Stat. 753; Pub. L. 111–203, title IX, § 982(c), July 21, 2010, 124 Stat. 1928.) Editorial Notes AMENDMENTS 2010—Subsec. (a). Pub. L. 111–203, § 982(c)(1), sub- stituted ‘‘It’’ for ‘‘Beginning 180 days after the date of the determination of the Commission under section 7211(d) of this title, it’’. Subsec. (b)(2)(A). Pub. L. 111–203, § 982(c)(2)(A), sub- stituted ‘‘issuers, brokers, and dealers’’ for ‘‘issuers’’. Subsec. (b)(2)(B), (G). Pub. L. 111–203, § 982(c)(2)(B), substituted ‘‘issuer, broker, or dealer’’ for ‘‘issuer’’ wherever appearing. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking. § 7213. Auditing, quality control, and independ- ence standards and rules (a) Auditing, quality control, and ethics stand- ards (1) In general The Board shall, by rule, establish, includ- ing, to the extent it determines appropriate, through adoption of standards proposed by 1 or more professional groups of accountants des- ignated pursuant to paragraph (3)(A) or advi- sory groups convened pursuant to paragraph (4), and amend or otherwise modify or alter, such auditing and related attestation stand- ards, such quality control standards, such eth- Page 2324 TITLE 15—COMMERCE AND TRADE § 7213 ics standards, and such independence stand- ards to be used by registered public account- ing firms in the preparation and issuance of audit reports, as required by this Act or the rules of the Commission, or as may be nec- essary 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 reg- istered 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 part- ner review and approval of such audit re- port (and other related information), and concurring approval in its issuance, by a qualified person (as prescribed by the Board) associated with the public account- ing firm, other than the person in charge of the audit, or by an independent reviewer (as prescribed by the Board); and (iii) in each audit report for an issuer, describe the scope of the auditor’s testing of the internal control structure and pro- cedures of the issuer, required by section 7262(b) of this title, 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 in- ternal control structure and proce- dures— (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 nec- essary to permit preparation of finan- cial statements in accordance with generally accepted accounting prin- ciples, and that receipts and expendi- tures 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 noncompli- ance 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 re- lating to— (i) monitoring of professional ethics and independence from issuers, brokers, and dealers on behalf of which the firm issues audit reports; (ii) consultation within such firm on ac- counting 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 7217 of this title, any por- tion of any statement of auditing stand- ards or other professional standards that the Board determines satisfy the require- ments of paragraph (1), and that were pro- posed 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 re- tain 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 transi- tional standards, to the extent the Board de- termines necessary, prior to a determination of the Commission under section 7211(d) of this title, and such standards shall be sepa- rately approved by the Commission at the time of that determination, without regard to the procedures required by section 7217 of this title that otherwise would apply to the approval of rules of the Board. (C) Transition period for emerging growth companies Any rules of the Board requiring manda- tory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional in- formation about the audit and the financial statements of the issuer (auditor discussion and analysis) shall not apply to an audit of an emerging growth company, as defined in section 78c of this title. Any additional rules adopted by the Board after April 5, 2012, shall not apply to an audit of any emerging growth company, unless the Commission de- termines that the application of such addi- tional requirements is necessary or appro- priate in the public interest, after consid- ering the protection of investors and wheth- er the action will promote efficiency, com- petition, and capital formation. (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 con- Page 2325 TITLE 15—COMMERCE AND TRADE § 7214 tent (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 advi- sory 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 re- ferred 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 7211(h) of this title the re- sults of its standard setting responsibilities dur- ing the period to which the report relates, in- cluding a discussion of the work of the Board with any designated professional groups of ac- countants and advisory groups described in paragraphs (3)(A) and (4) of subsection (a), and its pending issues agenda for future standard setting projects. (Pub. L. 107–204, title I, § 103, July 30, 2002, 116 Stat. 755; Pub. L. 111–203, title IX, § 982(d), July 21, 2010, 124 Stat. 1929; Pub. L. 112–106, title I, § 104, Apr. 5, 2012, 126 Stat. 310.) Editorial Notes REFERENCES IN TEXT This Act, referred to in subsec. (a)(1), is Pub. L. 107–204, July 30, 2002, 116 Stat. 745, known as the Sar- banes-Oxley Act of 2002. For complete classification of this Act to the Code, see Tables. Title II of this Act, referred to in subsec. (b), is title II of Pub. L. 107–204, July 30, 2002, 116 Stat. 771, which enacted subchapter II of this chapter and amended sec- tions 78c, 78j–1, 78l, and 78q of this title. For complete classification of title II to the Code, see Tables. AMENDMENTS 2012—Subsec. (a)(3)(C). Pub. L. 112–106 added subpar. (C). 2010—Subsec. (a)(1). Pub. L. 111–203, § 982(d)(1), sub- stituted ‘‘such ethics standards, and such independence standards’’ for ‘‘and such ethics standards’’. Subsec. (a)(2)(A)(iii). Pub. L. 111–203, § 982(d)(2), sub- stituted ‘‘in each audit report for an issuer, describe’’ for ‘‘describe in each audit report’’ in introductory pro- visions. Subsec. (a)(2)(B)(i). Pub. L. 111–203, § 982(d)(3), sub- stituted ‘‘issuers, brokers, and dealers’’ for ‘‘issuers’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking. § 7214. Inspections of registered public account- ing firms (a) In general (1) Inspections generally The Board shall conduct a continuing pro- gram of inspections to assess the degree of compliance of each registered public account- ing firm and associated persons of that firm with this Act, the rules of the Board, the rules of the Commission, or professional standards, in connection with its performance of audits, issuance of audit reports, and related matters involving issuers. (2) Inspections of audit reports for brokers and dealers (A) The Board may, by rule, conduct and re- quire a program of inspection in accordance with paragraph (1), on a basis to be determined by the Board, of registered public accounting firms that provide one or more audit reports for a broker or dealer. The Board, in estab- lishing such a program, may allow for dif- ferentiation among classes of brokers and dealers, as appropriate. (B) If the Board determines to establish a program of inspection pursuant to subpara- graph (A), the Board shall consider in estab- lishing any inspection schedules whether dif- fering schedules would be appropriate with re- spect to registered public accounting firms that issue audit reports only for one or more brokers or dealers that do not receive, handle, or hold customer securities or cash or are not a member of the Securities Investor Protec- tion Corporation. (C) Any rules of the Board pursuant to this paragraph shall be subject to prior approval by the Commission pursuant to section 7217(b) of this title before the rules become effective, in- cluding an opportunity for public notice and comment. (D) Notwithstanding anything to the con- trary in section 7212 of this title, a public ac- counting firm shall not be required to register with the Board if the public accounting firm is exempt from the inspection program which may be established by the Board under sub- paragraph (A). (b) Inspection frequency (1) In general Subject to paragraph (2), inspections re- quired by this section shall be conducted— (A) annually with respect to each reg- istered public accounting firm that regu- larly 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 100 or fewer issuers. (2) Adjustments to schedules The Board may, by rule, adjust the inspec- tion schedules set under paragraph (1) if the