Section 104 -- Inspections of Registered Public Accounting Firms
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.
In general. Subject to paragraph (2),
inspections required by this section shall be conducted--
annually with respect to each registered
public accounting firm that regularly provides audit reports for more
than 100 issuers; and
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.
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.
Procedures. The Board shall, in each inspection
under this section, and in accordance with its rules for such inspections--
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;
report any such act, practice, or omission,
if appropriate, to the Commission and each appropriate State regulatory
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.
Conduct of Inspections. In conducting an
inspection of a registered public accounting firm under this section, the
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;
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
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.
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.
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.
Report. A written report of the findings
of the Board for each inspection under this section, subject to subsection
(h), shall be--
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
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.
Interim Commission Review.
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--
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
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
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, or deemed to be "final agency action"
for purposes of section 704 of title 5, United States Code.
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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