H.R. 4616: Trusted Foreign Auditing Act of 2025

The bill titled "Trusted Foreign Auditing Act of 2025" aims to amend the current regulations related to public accounting firms under the Sarbanes-Oxley Act of 2002. The key provisions of this bill include:

Definition of Terms

The bill introduces definitions for important terms:

• Compromised Auditor: Refers to a branch or office of an accounting firm that is influenced or controlled by a "covered country," or has ties that could negatively impact its independence and objectivity.
• Covered Country: Any nation identified as a threat to U.S. national security in a recent report from the Director of National Intelligence, or any country classified as a "covered nation" under U.S. law.

Inspection of Registered Accounting Firms

The bill aims to change how the Public Company Accounting Oversight Board (PCAOB) inspects audits conducted by registered public accounting firms. Key changes include:

• Establishing criteria for identifying compromised auditors based on their ties to covered countries.
• Imposing restrictions on firms from countries of concern that utilize compromised auditors for preparing audit reports.

Trading Prohibition

Under this bill, if a company (referred to as a covered issuer) is based in a country deemed a concern and it hires a compromised auditor, it faces a trading prohibition. This means that there would be restrictions on trading the company’s stock until the issues regarding the auditor are resolved.

Public Hearings

The bill outlines procedures for conducting public hearings under the Sarbanes-Oxley Act, specifically focusing on cases involving compromised auditors. Key points include:

• Hearings would generally be private unless a compromised auditor related to the covered issuer is involved or if the Board decides to make it public for specific reasons.

Implementation of Regulations

The amendments included in this bill are designed to enhance transparency and oversight of auditors associated with foreign jurisdictions that pose potential risks to the integrity of financial reporting. This will potentially lead to greater accountability in the auditing process of businesses tied to these countries.

Overall Objective

The overall goal of the Trusted Foreign Auditing Act of 2025 is to ensure that U.S. investors can have greater confidence in the financial statements of companies that operate internationally, particularly those linked to nations that could compromise the integrity of audits.

Relevant Companies

• None found