Supreme Court rules US oversight board unconstitutional
The US Public Company Accounting Oversight Board (PCAOB) established by the Sarbanes Oxley Act 2002 has been declared unconstitutional by the Supreme Court, reports our sister site AccountingWEB.com.
Following the Enron and WorldCom collapses and other allegations of auditor independence violations at Big Four firms, the Sarbanes-Oxley Act of 2002 (SOX) stipulated that auditors of listed US companies should be subject to external and independent oversight. PCAOB was set up to be that watchdog and the five-member board is appointed by the US Securities and Exchange Commission in consultation with the Federal Reserve chairman and the Secretary of the Treasury.
In 2006, US lobby group the Free Enterprise Fund (FEF) launched a legal action arguing that SOX violated the US constitution’s principle of separation of powers because it performed an executive function without being appointed by the US president, and not subject to budgetary control by Congress.
On this point, the Supreme Court ruled 5-4 in FEF’s favour in a judgement released on Monday 28 June.