SEC Chairman Christopher Cox hailed an appeals court decision that said the Public Company Accounting Oversight Board is constitutional.
The court ruled in a 2-1 decision that the Sarbanes-Oxley Act creating the PCAOB did not encroach upon the Constitution or violate the separation of powers clause. The Free Enterprise Fund and a small audit firm, Beckstead & Watts, which had been faulted by the PCAOB in 2004 for some of its audits, filed suit in 2006 against the board.
They claimed that the way PCAOB members were appointed by the SEC violated the Constitution, which gives the president the power to make appointments with the consent of the Senate.
“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,” said Cox. “The creation of the PCAOB was a central feature of the Sarbanes-Oxley Act, which was enacted in part in response to repeated failures of audit effectiveness and loss of investor confidence. The commission believes that the PCAOB is a highly effective organization whose continued existence is vital to protecting investors and furthering the public interest in the preparation of accurate and informative audit reports.”
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