We’ve been talking about HB 2842 for almost a month – this legislation would make it illegal for directors and executives of public interest entities to lie to their auditors. In language similar to Sec. 303 of the federal Sarbanes-Oxley Act, HB 2842 provides that "an officer or director…or another person designated…to provide information to an independent public accounting firm, commits an offense if the person takes any action to fraudulently influence, coerce, manipulate, or mislead the accounting firm…"
After a series of bureaucratic errors too tedious to mention here, the bill finally had its hearing before the House State Affairs committee yesterday. The hearing went well, with State Board Chair Bill Atkinson and TSCPA Chair Ed Polansky testifying in favor of the the bill. It was left pending and will likely be voted favorably from the committee at its next meeting.
The bill was initially recommended to Gov. Perry in a report filed by the State Board last year, dealing with implementation of SarbOx-like controls for public interest entities. HB 2842 defines public interest entities as
- financial institutions
- publicly traded companies
- county hospitals
- pension plans
- school districts
The State Board felt that "those entities whose audited financial statements are relied upon by significant numbers of stakeholders … or by regulators ..." and where "potential … harm to the public from an audit failure … would generally be significant" should be subject to the provisions similar to Sarbanes-Oxley for fraudulently misleading an auditor.
The Governor agreed and asked Rep. Chisum to carry the bill. Sen. Williams (R-The Woodlands) filed a companion bill, Senate Bill 1576, in the Senate. TSCPA has worked closely with the State Board, the Governor’s office and both Chisum and Williams in drafting and moving the bill through the legislature.