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Sarbanes Oxley
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SEC.
104. INSPECTIONS OF REGISTERED PUBLIC
ACCOUNTING FIRMS.
(a) IN GENERAL.—The
Board shall conduct a continuing program
of
inspections to assess the degree of compliance
of each
registered
public accounting 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.
(b) INSPECTION FREQUENCY.—
(1) IN GENERAL.—Subject
to paragraph (2), inspections
required by
this section 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 100 or fewer issuers.
(2) ADJUSTMENTS TO
SCHEDULES.—The Board may, by rule,
adjust the
inspection schedules set under paragraph (1)
if the
Board finds
that different inspection schedules are
consistent
with the
purposes of this Act, the public interest, and
the
protection of
investors. The Board may conduct special
inspections
at the
request of the Commission or upon its own
motion.
(c) PROCEDURES.—The
Board shall, in each inspection under
this section,
and in accordance with its rules for such
inspections—
(1) identify
any act or practice or omission to act by the
registered
public accounting firm, or by any associated
person
thereof,
revealed by such inspection that may be in
violation
of this Act,
the rules of the Board, the rules of the
Commission,
the firm’s
own quality control policies, or professional
standards;
(2) report
any such act, practice, or omission, if
appropriate,
to the
Commission and each appropriate State
regulatory
authority;
and
(3) begin a
formal investigation or take disciplinary
action,
if
appropriate, with respect to any such
violation, in accordance
with this Act
and the rules of the Board.
(d) CONDUCT OF
INSPECTIONS.—In conducting an
inspection
of a
registered public accounting firm under this
section, the Board
shall—
(1) inspect
and review selected audit and review
engagements
of the firm
(which may include audit engagements that
are the
subject of ongoing litigation or other
controversy
between the
firm and 1 or more third parties), performed
at
various
offices and by various associated persons of
the firm,
as selected
by the Board;
(2) evaluate
the sufficiency of the quality control system
of the firm,
and the manner of the documentation and
communication
of that
system by the firm; and
(3) perform
such other testing of the audit, supervisory,
and quality
control procedures of the firm as are
necessary
or
appropriate in light of the purpose of the
inspection and
the
responsibilities of the Board.
(e) RECORD
RETENTION.—The rules of the Board
may require
the retention
by registered public accounting firms for
inspection
purposes of
records whose retention is not otherwise
required by
section 103
or the rules issued thereunder.
(f) PROCEDURES FOR
REVIEW.—The rules of the Board
shall
provide a
procedure for the review of and response to a
draft
inspection
report by the registered public accounting
firm under
inspection.
The Board shall take such action with respect
to such
response as
it considers appropriate (including revising
the draft
report or
continuing or supplementing its inspection
activities before
issuing a
final report), but the text of any such
response, appropriately
redacted to
protect information reasonably identified by
the
accounting firm as confidential, shall be
attached to and made
part of the
inspection report.
(g) REPORT.—A
written report of the findings of the Board
for each
inspection under this section, subject to
subsection (h),
shall be—
(1)
transmitted, in appropriate detail, to the
Commission
and each
appropriate State regulatory authority,
accompanied
by any letter
or comments by the Board or the inspector,
and any
letter of response from the registered public
accounting
firm; and
(2) made
available in appropriate detail to the public
(subject
to section
105(b)(5)(A), and to the protection of such
confidential
and
proprietary information as the Board may
determine
to be
appropriate, or as may be required by law),
except
that no
portions of the inspection report that deal
with criticisms
of or
potential defects in the quality control
systems
of the firm
under inspection shall be made public if those
criticisms or
defects are addressed by the firm, to the
satisfaction
of the Board,
not later than 12 months after the date
of the
inspection report.
(h) INTERIM COMMISSION REVIEW.—
(1)
REVIEWABLE MATTERS.—A registered public
accounting
firm may seek
review by the Commission, pursuant to such
rules as the
Commission shall promulgate, if the firm—
(A) has
provided the Board with a response, pursuant
to rules
issued by the Board under subsection (f), to
the
substance of
particular items in a draft inspection report,
and disagrees
with the assessments contained in any final
report
prepared by the Board following such response;
or
(B) disagrees
with the determination of the Board that
criticisms or
defects identified in an inspection report
have
not been
addressed to the satisfaction of the Board
within
12 months of
the date of the inspection report, for
purposes
of subsection
(g)(2).
(2) TREATMENT
OF REVIEW.—Any decision of the Commission
with respect
to a review under paragraph (1) shall not
be reviewable
under section 25 of the Securities Exchange
Act of 1934
(15 U.S.C. 78y), or deemed to be ‘‘final
agency
action’’ for
purposes of section 704 of title 5, United
States
Code.
(3)
TIMING.—Review under paragraph (1) may be
sought
during the
30-day period following the date of the event
giving
rise to the
review under subparagraph (A) or (B) of
paragraph
(1).
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