SEC Welcomes PCAOB Decision

A federal appeals court decided on August 22 that the Public Company Accounting Oversight Board, and the Sarbanes-Oxley Act that created it, are constitutional. The ruling rejects the claim that the PCAOB’s existence violates the Constitution’s separation-of-powers principle.

The Securities and Exchange Commission’s Chairman Christopher Cox said in a statement, “The decision today of the Court of Appeals for the District of Columbia Circuit upholding the constitutionality of the Public Company Accounting Oversight Board is welcome news for the Commission, investors and U.S. capital markets.”

The decision by the U.S. Court of Appeals for the District of Columbia Circuit preserves Sabanes-Oxley and the board, which oversees auditors of public companies. The challenge dates back to 2006 when Beckstead and Watts, a Nevada-based accounting firm, complained that the PCAOB was not a legal body after the board criticized the firm for some of its audits in 2004, according to CFO.

The decision on August 22 was two votes to one. A three-judge panel made the decision and it could still be appealed to a circuit appeals court or to the Supreme Court, if either decides to take the case. The decision concludes that while the President may not appoint the PCAOB’s members, the President still maintains significant influence over the board.