Court Throws Out PCAOB Lawsuit

A federal judge has dismissed a lawsuit seeking to invalidate the Public Company Accounting Oversight Board (PCAOB) on constitutional grounds.

The Free Enterprise Fund said in a statement that it will appeal the decision. The 2006 suit, which was also brought by the Competitive Enterprise Institute and a small audit firm, contends that the PCAOB violates the appointments clause of the U.S. Constitution because the Securities and Exchange Commission does not have the power to appoint PCAOB members.

U.S. District Court Judge James Robertson said in his opinion that "the plaintiffs have brought a facial challenge to the PCAOB, presenting nothing but an hypothetical scenario of an overzealous or rogue PCAOB investigator."

John Berlau, Director of the Center for Entrepreneurship, said, “The court said that even though PCAOB members are appointed by a multimember body - the SEC, not by the head of an agency as required by the Constitution – that this is a harmless error. But when constitutional safeguards are at stake, there are no harmless errors.”

The PCAOB was created under the Sarbanes-Oxley corporate reform legislation of 2002 to oversee the auditors of public companies.

"We are pleased with the court's decision and look forward to continuing to fulfill the mandate given us by Congress to protect the interests of investors," the PCAOB said in a statement.

You may like these other stories...

By Jason Bramwell Government leaders of eight of the world's largest economies pledged on June 18 to take a tougher stance on fighting tax evasion. The Group of Eight (G8) leaders, who met in Northern Ireland,...
By Jason BramwellAttorney General Eric Holder is scheduled to testify on May 15 before the House Judiciary Committee, one day after he announced the Justice Department has opened a criminal investigation of the IRS for...
By Jason BramwellPresident Barack Obama says he will not tolerate political bias at the IRS and promised to get to the bottom of the agency's admitted targeting of conservative groups, according to a May 13 article in...

Upcoming CPE Webinars

Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.