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<PRE>[DOCID: f:s1896is.txt]






107th CONGRESS
  2d Session
                                S. 1896

   To prohibit accounting firms from providing management consulting 
 services for the companies they audit and any other non-audit related 
   services that could result in a potential conflict of interest or 
    otherwise impair the independence of the auditor, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 24, 2002

  Mrs. Boxer introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
   To prohibit accounting firms from providing management consulting 
 services for the companies they audit and any other non-audit related 
   services that could result in a potential conflict of interest or 
    otherwise impair the independence of the auditor, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Auditor Independence Act of 2002''.

SEC. 2. FINDINGS.

    Congress finds that--
            (1) public confidence in the integrity of an audit by an 
        accounting firm depends on whether auditors are in fact 
        independent from the companies that they audit; and
            (2) an accountant is not independent whenever, during the 
        calendar year in which the audit is performed, the accountant--
                    (A) has a mutual or conflicting interest with the 
                audit client;
                    (B) audits the accountant's own work;
                    (C) functions as management, an employee, or a 
                consultant of the audit client; or
                    (D) acts as an advocate for the audit client.

SEC. 3. PROHIBITION ON PERFORMANCE OF AUDIT AND NON-AUDIT SERVICES.

    (a) In General.--Section 10A of the Securities Exchange Act of 1934 
(15 U.S.C. 78j-1) is amended by adding at the end the following:
    ``(g) Prohibited Activities.--An independent public accountant that 
performs for any entity any auditing or related service required by 
this title, and any affiliated person of that accountant, may not 
provide to that entity, during the calendar year in which the auditing 
or related service is performed--
            ``(1) any management consulting service;
            ``(2) any other service that is not related to the audit; 
        or
            ``(3) any other service that could result in a potential 
        conflict of interest or otherwise impair the independence of 
        the auditor, as determined by the Commission.''.
    (b) Commission Regulations.--Not later than 90 days after the date 
of enactment of this Act, the Securities and Exchange Commission shall 
issue final regulations to carry out subsection (g) of section 10A of 
the Securities Exchange Act of 1934, as added by this section, 
including, consistent with that subsection--
            (1) a definition of the term ``management consulting 
        service'' that includes consulting relating to--
                    (A) information technology infrastructure design 
                and implementation;
                    (B) organizational behavior;
                    (C) marketing; and
                    (D) business strategy; and
            (2) the identification by the Commission of other non-audit 
        services prohibited by that subsection.
    (c) Effective Date.--The amendments made by this Act shall become 
effective on the date of final issuance of regulations under subsection 
(b)
                                 &lt;all&gt;

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