SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Audit of the IRS Act of 1997''.

SEC. 2. FINDINGS.

    The Congress finds that the General Accounting Office cannot attest 
to the reliability of the Internal Revenue Service's financial 
statements because--
            (1) the amount of total revenue and tax refunds could not 
        be verified or reconciled to accounting records maintained for 
        individual taxpayers in the aggregate;
            (2) the amounts reported for various types of taxes 
        collected, such as social security, income, and excise taxes, 
        could not be substantiated;
            (3) the reliability of reported estimates for valid 
        accounts receivable and for collectible accounts receivable 
        could not be determined;
            (4) a significant portion of the Internal Revenue Service's 
        reported nonpayroll operating expenses could not be verified; 
        and
            (5) amounts reported as appropriations available for 
        operations could not be reconciled fully with the Treasury 
        Department's central accounting records, and hundreds of 
        millions of dollars in differences were identified.

SEC. 3. INDEPENDENT AUDIT OF THE INTERNAL REVENUE SERVICE.

    (a) In General.--The Secretary of the Treasury shall cause to be 
conducted an audit of the Internal Revenue Service. Such audit shall be 
conducted by an independent external auditor selected by the Secretary 
in accordance with subsection (b).
    (b) Selection of Independent External Auditor.--The independent 
external auditor shall be selected from among the large, national 
accounting firms determined by the Secretary to be capable of providing 
the audit required by this section pursuant to a process by which the 
Secretary invites such firms to submit a proposal for such audit, 
together with a bid.
    (c) Initiation of Audit.--Not later than 60 days after the date of 
the enactment of this Act, the independent external auditor selected to 
conduct the audit required by this section shall begin such audit.
    (d) Auditing Procedures.--
            (1) In general.--The audit under subsection (a) shall be 
        conducted in accordance with generally accepted auditing 
        principles. The independent external auditor shall consider the 
        deficiencies described in section 2 as well as effectiveness of 
        accounting organizations and systems, internal audit and 
        control, and related administrative practices of the Internal 
        Revenue Service.
            (2) Access to information.--
                    (A) Information given by the internal revenue 
                service.--The Internal Revenue Service shall give the 
                independent external auditor the information such 
                auditor requires about the duties, powers, activities, 
                organization, and financial transactions of the 
                Internal Revenue Service. The independent external 
                auditor may inspect an agency record to obtain such 
                information.
                    (B) Books, papers, personnel, etc.--The independent 
                external auditor shall have such access to the 
                personnel and to the books, papers, and other 
                information of the Internal Revenue Service as such 
                auditor considers necessary or appropriate to conduct 
                the audit required by this section.
    (e) Protection of Information.--
            (1) Level of protection.--The independent external auditor 
        shall maintain the same level of confidentiality for a record 
        made available under this section as is required of the 
        Director of the Internal Revenue Service. Officers and 
        employees of the independent external auditor shall be subject 
        to the same statutory penalties for unauthorized disclosure or 
        use of any such record as officers or employees of the Internal 
        Revenue Service.
            (2) Personnel privacy.--The independent external auditor 
        shall keep information described in section 552(b)(6) of title 
        5, United States Code, that such auditor obtains in a way that 
        prevents unwarranted invasions of personal privacy.
            (3) Providing information to congress.--This section does 
        not authorize information to be withheld from Congress.
    (f) Report of Results of Audit.--Not later than one year after the 
initiation of the audit required by this section, the independent 
external auditor shall submit a report concerning the results of the 
audit conducted under this section to the Committee on Ways and Means 
of the House of Representatives and the Committee on Finance of the 
Senate.
    (g) Funding.--
            (1) In general.--Except as provided by paragraph (2), 
        amounts appropriated to the Internal Revenue Service shall be 
        available to carry out this section.
            (2) Exceptions.--Amounts made available to the Internal 
        Revenue Service for the following shall not be available to 
        carry out this section:
                    (A) To maintain a training program to ensure that 
                Internal Revenue Service employees are trained in 
                taxpayers' rights, in dealing courteously with the 
                taxpayers, and in cross-cultural relations.
                    (B) The Tax Counseling for the Elderly Program.
Audit of the IRS Act of 1997 - Directs the Secretary of the Treasury to arrange for an audit of the Internal Revenue Service by an independent external auditor.  Sets forth provisions concerning:  (1) selection of the auditor; (2) audit procedures; (3) confidentiality; (4) reporting audit results; and (5) funding the audit.
Audit of the IRS Act of 1997