AICPA latest trends in the industry regulatory legislation

After the Enron case , the regulation of the CPA profession has caused unprecedented attention from all sectors of the United States . Among them, the most striking of the most influential American CPA industry will be the U.S. Congress passed legislation to reform the requirements put forward by the industry regulator CPA . This year on April 24 , the U.S. House of Representatives to 334 votes in favor , 90 votes against the absolute advantage through Act No. 3763 by the chairman of the House Financial Services Committee , Republican Oxley filed " with the responsibility of auditing companies , obligations and transparency 2002 Act " ( hereinafter referred to as " 3763 Act " ) . June 18 , the Senate Banking Committee by 17 votes in favor, 4 votes against the result of the approval of the Chairman of the Committee , Democrat Sarbanes submitted " Public Company Accounting Reform and Investor Protection Act of 2002 ," sent to the Senate vote ( hereinafter referred to as "Sarbanes Act " ) . These bills have a significant impact on the legal system of the U.S. regulatory system from CPA , AICPA industry self- management model will therefore be a historic change.

First, the bill passed by the U.S. House No. 3763

( A ) the main content

Act No. 3763 is divided into 22 parts, each involving CPA supervision, information disclosure , corporate control , record-keeping , conflict of interest analysts , credit rating agencies, regulators and other content. Among them, the CPA is the most main content regulation , provisions are also the most detailed accounting for nearly half of the length of the bill . This part of the main contents are as follows :

1 Modify the " Exchange Act " requires the establishment of an independent " public regulatory organization ." According to the U.S. in 1934 , " Securities Exchange Act " provisions (Section 10A), the financial statements of listed companies must be certified public accountants , and to the U.S. Securities and Exchange Commission (SEC) submitted . Act No. 3763 of 1934 , " Securities Exchange Act " was amended in the "Section 10A" clause adds "10B", called for the establishment of a " common regulatory organization " (Public Regulatory Organization, referred to as PRO), under the supervision of the SEC , responsible for the implementation of the financial statements of listed companies to conduct an independent CPA audit supervision and discipline . The bill provides that if the following two conditions occur , SEC should refuse to accept the financial statements of listed companies : Certified Public Accountant ( 1 ) perform the audit disobedience PRO regulatory system ; ( 2 ) In a recent CPA examination is not considered audited financial statements of listed companies comply with the conditions .

(2) on the establishment of the United States SEC PRO formulated the following specifications :

Board members (1) PRO shall be composed of five people . Where: 2 people should hold CPA license and have recent experience of the audit of listed companies ; 2 people can hold CPA license , but the Board within two years before entering the accounting profession never work ; additionally a people who do not hold CPA license in person .

(2) PRO should have the following capabilities : ① can CPA requirements and mandatory requirements and related personnel to follow the terms of the Act , code of ethics and professional standards and the ability of other provisions PRO ; ② able to review the results of the work of Certified Public Accountants and related personnel and practicing quality ; ③ to review CPA independence could damage potential conflicts of interest , such as a registered accountant conflict of interest with the company , the Board of Directors and senior personnel.

(3) PRO CPA should have the right to discipline and related personnel . As a certified public accountant and finds relevant personnel are not qualified to audit listed companies' financial statements and other financial statements. Before taking disciplinary measures should be checked CPA program and to provide a fair opportunity to be disciplinary hearing people . Should be disciplinary behavior include: ① CPAs and related industries in violation of the independence rules , code of ethics or professional competence criteria ; ② CPA and related personnel is considered a violation of the securities laws or regulations of SEC or the courts ; ③ CPA and related auditor to perform the audit independence is affected by the damage ; ④ CPA and related personnel in violation of SEC rules established under Act No. 3763 , while providing audit and related consulting services ; ⑤ CPA and related personnel hinder PRO checks or checks not cooperation.

(4) PRO should be self-financing , but the source of funds should not rely solely on the CPA profession .

(5) PRO should publicly disclose its inspection procedures and methods , and accept public comment. Meanwhile , PRO should establish appropriate procedures to prevent and reduce conflicts of interest of the members of the organization and be able to resolve these conflicts.

(6) PRO shall establish appropriate procedures to inform the inspection results and evidence of State Boards of Accountancy , and negotiate with the state board of accountancy .

(7) PRO shall establish appropriate procedures to check the results of their case CPA suspected of violating securities laws notification SEC.

( 8 ) According to the SEC to determine the manner , PRO investigating authority to issue subpoenas to require witnesses to testify and so on.

3 on the prohibition while providing audit and non-audit services. (1) SEC should revise existing relevant independence rules prohibit accounting firms to audit clients to provide non- audit services to the following two : First, financial information systems design and implementation ; Second, the internal audit . ( 2 ) authorize the SEC on CPA listed as non-audit services provided by the company would not affect the independence of the review , and on the list of the non- audit services are prohibited to be modified. Just really conducive to the protection of investors and the public interest , SEC shall have the right at any time to modify the existing list of prohibited non-audit services. (3) SEC should review the case of non- audit services , and regulatory and legislative proposals , such as a report to the House Financial Services Committee and the Senate Banking Committee . (4) SEC should modify the existing CPA fee disclosure requirements to increase disclosure .

4 PRO inspection and management of the hearing procedure and the requirements for PRO SEC oversight program again . The Act provides , PRO inspection process and its results should be protected before the SEC before the review is not completed its review of the conclusions drawn or should not leak or civil trial for federal or state programs , but also from constraints " freedom of Information Act " and requires public disclosure . Inspection findings PRO SEC the right to review and disciplinary decisions made ​​, and the right to confirm , modify, and make disciplinary decisions to lift PRO .

5 Requirements PRO on rules enacted or proposed changes to existing rules thereunder apply to the SEC. SEC proposed rules should be published , and to the interests of all parties for comment.

Different reactions ( two ) parties

U.S. President George W. Bush in the bill passed on the same day in a statement that the House of Representatives passed the bill quickly to the United States is responsible for 80 million people , and that the bill contains a "ten -point plan " he proposed in March of three core principles Jixiang provide investors with better information to make corporate leaders more accountable , to build a stronger and more independent audit system.

American Institute of Certified Public Accountants (AICPA) also on April 24 in a statement that the bill is passed by the U.S. House of Representatives CPA unprecedented regulatory regime toughest reform measures AICPA industry has experienced 110 years of self- management history, but still grateful to the House of Representatives passed the bill to rebuild investor confidence , and said it would cooperate with the PRO intends to set up by practical action .

However , Act No. 3763 has also been a lot of criticism. Some Democrats and the Organization of Consumers Unions reacted particularly strongly , that the bill would grant excessive powers and duties of the SEC, over-reliance on voluntary compliance , it is impossible to fully prevent conflicts of interest that exist in the audit . As Democrat John Dingell , commented: " This is simply nonsense to give a gift to the CPA profession and those who steal the American public would like Enron bill .. ."

Second, the U.S. Senate Banking Committee on Sarbanes bill

( A ) the main content

June 18 , also in the U.S. federal court sentenced Andersen obstruct justice after the third day of the crime was established , the U.S. Senate Banking Committee by 17 votes in favor, 4 votes against the results of the Sarbanes bill approved by the Senate plenary session vote. According to media reports , the main contents include : ( 1 ) the establishment of a five- person Public Company Accounting Oversight Board (Poblic Company Accounting Oversight Board), responsible for overseeing the audit of listed companies , and require five members from the SEC by the U.S. Treasury, Federal reserve Board after consultation appointment. Five members at most two members from the accounting profession , the requirements to represent more than half of the public interest . ( 2 ) five -member committee under the supervision of a separate SEC civil regulatory agencies , through the SEC's mandate , the Committee shall have the right to develop or approve accounting standards and auditing standards , and guidelines for implementation by disciplinary measures . ( 3 ) requires CPAs to follow strict independence standards prohibit CPAs to audit clients while providing nine kinds of non-audit services, including bookkeeping , financial systems design, human resources services and legal services. If the fee is less than the non-audit services by audit clients pay 5 % of the total cost , and only after the approval of the audit report to the SEC can provide customers with an exceptional case . Tax services can only be provided to the Audit Committee in the case of company -approved .

Differences with the House bill No. 3763 Sarbanes bill has three main points : the different components ( 1 ) an independent regulatory agency. Sarbanes bill more emphasis on the public interest , requiring at most two from the accounting profession , and the rest by public personalities ; while Act No. 3763 is more emphasis on professional background and experience in accounting consisting of personnel , there are two requirements must have CPA license , and with recent experience in the practice of listed companies , but also holds a CPA and then have two licenses, requires only one other person can not hold a CPA license. Moreover , Sarbanes Act requires SEC to appoint five members of the Committee , it must consult with the Treasury and the Federal Reserve Board , so that the organization has more government management background. ( 2 ) the development and approval authority for the provisions of the various accounting and auditing standards , Sarbanes bill requires the establishment of an independent regulatory body to develop or approve new standards, but without making the provisions of this Act No. 3763 . ( 3 ) Depending on the scope of the prohibition of non- audit services . Sarbanes Act prohibits offers nine kinds of non-audit services to audit clients , its coverage is much greater than the scope of the prohibition Act No. 3763 .

Different reactions ( two ) parties

Sarbanes bill was introduced by Democrats , it has been supported by the vast majority of Democrats . In February this year was Arthur Andersen firm hired internal reforms carried out by former Fed Chairman Paul Volcker , and former SEC Chairman Arthur Levitt has publicly expressed support for the bill , which they also are Democrats . The bill has also been part of the Republican support , for example, when the Senate Banking Committee approved the bill , 17 votes in there six Republicans ( the committee 's 10 Republicans voted against and four others ) . The bill also has been welcomed by the representative of the interests of consumers of trade union organizations.

However, many Republicans remain strongly opposed to the introduction of this bill , including the current SEC Lord Xiha Wei ? Pete , he repeatedly stressed that opposition to the CPA profession radical reform .

AICPA also issued a statement opposing the introduction of the bill , that the bill would be very detrimental to small firms, will lead to bureaucratic interference in the management of the industry , will also allow CPA accounting industry is facing more lawsuits .

From the analysis of the current situation , the possibility of the Senate vote on the bill by Sarbanes considerable . Once the Sarbanes bill passed by the Senate , the Senate will form a joint committee with the House of Representatives , coordination and implementation differences between the two bills . In comparison, the Senate bill is not only more aggressive , which is also higher than the legal effect of the House bill. Therefore, the U.S. industry will be closely watched CPA process of this bill .