Standard-Setting
Section 103(a)(1) of the Sarbanes-Oxley Act of 2002 (the Act) directs the Board to establish auditing and related attestation standards, quality control standards, and ethics standards to be used by registered public accounting firms in the preparation and issuance of audit reports, as required by the Act or the rules of the Commission, or as may be necessary or appropriate in the public interest or for the protection of investors. Similarly, Section 103(b) authorizes the Board to establish such rules as may be necessary or appropriate to implement the auditor independence requirements in, or as authorized under, Title II of the Act, Auditor Independence.
Section 103(a)(4) directs the Board to convene such expert advisory groups as may be appropriate to aid in standard-setting and affords the Board considerable discretion in determining the procedures by which it will develop and adopt auditing and related professional practice standards. The Board has convened a Standing Advisory Group (SAG) to advise the Board on the establishment of auditing and related professional practice standards.
While the Board will, by rule, establish standards, it recognizes that the development of such standards should be an open, public process in which investors, the accounting profession, the preparers of financial statements, and others have the opportunity to participate.
The Board's staff is actively involved in drafting proposed standards and in advising the Board in its standard-setting. The Board also encourages proposals and recommendations on its standard-setting agenda and standards development projects from the public. The Board also may establish one or more ad hoc task forces to assist the staff with the drafting of technical language, among other things.
After completing the development process, which ordinarily includes consultation with the SAG and may include discussion in other public forums such as roundtable discussions, the Board’s staff recommends to the Board in an open meeting a proposed standard. Proposed standards approved by the Board in an open meeting ordinarily will be published for public consideration and comment. After the Board and its staff evaluate the comments received, the Board’s staff recommends to the Board in an open meeting a final standard, revised as necessary and appropriate based on the evaluation of the comments received. Final standards adopted by the Board are submitted to the Securities and Exchange Commission for approval and do not become effective unless approved by the Commission.
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