Federal

To require auditor independence standards of the Public Company Accounting Oversight Board and the Securities and Exchange Commission applicable to past audits of a company occurring before it was a public company to treat an auditor as independent if the auditor meets established professional standards, and for other purposes.

Source: Congress.gov · 634 words in original text

What This Bill Does

This bill changes how two government agencies judge whether auditors (accountants who examine company finances) are independent when reviewing a company's past financial records from before the company became publicly traded. The bill says these agencies must accept an auditor as independent if the auditor meets professional accounting standards, rather than applying stricter rules.

Who It Affects

Companies that are currently publicly traded or have filed paperwork to become publicly traded, their auditors, the Public Company Accounting Oversight Board (a private nonprofit that oversees auditors of public companies), and the Securities and Exchange Commission (a federal agency that regulates securities markets).

Key Provisions

- The Public Company Accounting Oversight Board must treat an auditor as independent for past audits completed before a company became public if the auditor meets standards from the American Institute of Certified Public Accountants (the main professional organization for accountants in the United States). (Sec. 1(a)) - For foreign companies, the Public Company Accounting Oversight Board must treat an auditor as independent if the auditor meets comparable professional standards from the auditor's home country. (Sec. 1(a)) - The Securities and Exchange Commission must use the same approach: treating auditors as independent for past pre-public audits if they meet American Institute of Certified Public Accountants standards or comparable foreign standards. (Sec. 1(b))

What Changes

The Public Company Accounting Oversight Board and the Securities and Exchange Commission will no longer apply their own stricter independence rules to audits that happened before a company went public. Instead, they will accept professional accounting standards as sufficient proof of auditor independence.

Important Definitions

None defined in bill text.

I 118TH CONGRESS 1ST SESSION H. R. 2606 To require auditor independence standards of the Public Company Accounting Oversight Board and the Securities and Exchange Commission applicable to past audits of a company occurring before it was a public company to treat an auditor as independent if the auditor meets established professional standards, and for other purposes. IN THE HOUSE OF REPRESENTATIVES APRIL 13, 2023 Mr. MCHENRY introduced the following bill; which was referred to the Committee on Financial Services A BILL To require auditor independence standards of the Public Company Accounting Oversight Board and the Securities and Exchange Commission applicable to past audits of a company occurring before it was a public company to treat an auditor as independent if the auditor meets established professional standards, and for other pur- poses. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 VerDate Sep 11 2014 03:52 Apr 15, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2606.IH H2606 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 2606 IH SECTION 1. AUDITOR INDEPENDENCE FOR CERTAIN PAST 1 AUDITS OCCURRING BEFORE AN ISSUER IS A 2 PUBLIC COMPANY. 3 (a) AUDITOR INDEPENDENCE STANDARDS OF THE 4 PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD.— 5 Section 103 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 6 7213) is amended by adding at the end the following: 7 ‘‘(e) AUDITOR INDEPENDENCE FOR CERTAIN PAST 8 AUDITS OCCURRING BEFORE AN ISSUER IS A PUBLIC 9 COMPANY.—With respect to an issuer that is a public 10 company or an issuer that has filed a registration state- 11 ment to become a public company, the auditor independ- 12 ence rules established by the Board with respect to audits 13 occurring before the last fiscal year of the issuer completed 14 before the issuer filed a registration statement to become 15 a public company shall treat an auditor as independent 16 if— 17 ‘‘(1) the auditor is independent under standards 18 established by the American Institute of Certified 19 Public Accountants applicable to certified public ac- 20 countants in United States; or 21 ‘‘(2) with respect to a foreign issuer, the audi- 22 tor is independent under comparable standards ap- 23 plicable to certified public accountants in the issuer’s 24 home country.’’. 25 VerDate Sep 11 2014 03:52 Apr 15, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2606.IH H2606 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 2606 IH (b) AUDITOR INDEPENDENCE STANDARDS OF THE 1 SECURITIES AND EXCHANGE COMMISSION.—Section 10A 2 of the Securities Exchange Act of 1934 (15 U.S.C. 78j– 3 1) is amended by adding at the end the following: 4 ‘‘(n) AUDITOR INDEPENDENCE FOR CERTAIN PAST 5 AUDITS OCCURRING BEFORE AN ISSUER IS A PUBLIC 6 COMPANY.—With respect to an issuer that is a public 7 company or an issuer that has filed a registration state- 8 ment to become a public company, the auditor independ- 9 ence rules established by the Commission under the securi- 10 ties laws with respect to audits occurring before the last 11 fiscal year of the issuer completed before the issuer filed 12 a registration statement to become a public company shall 13 treat an auditor as independent if— 14 ‘‘(1) the auditor is independent under standards 15 established by the American Institute of Certified 16 Public Accountants applicable to certified public ac- 17 countants in United States; or 18 ‘‘(2) with respect to a foreign issuer, the audi- 19 tor is independent under comparable standards ap- 20 plicable to certified public accountants in the issuer’s 21 home country.’’. 22 Æ VerDate Sep 11 2014 03:52 Apr 15, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6301 E:\BILLS\H2606.IH H2606 kjohnson on DSK79L0C42PROD with BILLS

Important: This plain English summary was generated by AI and is provided for informational purposes only. It is not legal advice. Always consult the official bill text on Congress.gov or a qualified attorney for legal matters.