Trusted Foreign Auditing Act of 2025
Summary
The Trusted Foreign Auditing Act of 2025 amends the Sarbanes-Oxley Act of 2002. It aims to enhance oversight of foreign auditing firms that may be compromised by foreign governments, particularly those considered national security threats. The bill introduces definitions for 'compromised auditor' and 'covered country,' linking them to national security assessments.
Expected Effects
The Act will require increased disclosure and potentially prohibit trading for companies using compromised auditors. It also modifies the conditions under which public hearings can be held, specifically concerning compromised auditors. Ultimately, this could lead to greater scrutiny of companies with international operations and their auditing practices.
Potential Benefits
- Enhanced transparency in financial reporting by identifying compromised auditors.
- Reduced risk of financial fraud and malfeasance due to compromised audits.
- Increased investor confidence in the accuracy of financial statements.
- Stronger national security by limiting the influence of adversarial nations on US-listed companies.
- Improved accountability for foreign auditing firms operating in the US.
Most Benefited Areas:
Potential Disadvantages
- Increased compliance costs for companies with international operations.
- Potential for retaliatory measures from covered countries, impacting international relations.
- Possible disruptions to global supply chains and investment flows.
- Risk of overly broad definitions that could inadvertently target legitimate auditing firms.
- Complexity in implementation and enforcement due to the need for ongoing national security assessments.
Constitutional Alignment
The bill aligns with the Constitution's implied powers to regulate commerce and ensure national security. Article I, Section 8 grants Congress the power to regulate commerce with foreign nations. The Act's focus on protecting US investors and markets from foreign threats also aligns with the government's responsibility to provide for the common defense.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).