Supreme Court Rules against PCAOB

On June 28, the U.S. Supreme Court ruled that only a very small, specific part of SOX — the provisions about how a PCAOB appointee can be removed from the Board — is unconstitutional because the process violates the Constitution's appointments clause.

AICPA President and CEO Barry Melancon said, “The court's ruling is a victory for investors and for the accounting profession. The decision effectively fixes the constitutionality of the PCAOB by making board members subject to `at will' removal by the SEC and therefore the president. It sustains the continued function of both the PCAOB and Sarbanes-Oxley. As such, the court rejected a transparent attempt to undermine the post-Enron reforms that have served our financial markets well.”

The Center for Audit Quality (CAQ) Executive Director Cindy Fornelli said, “The CAQ is pleased that the U.S. Supreme Court's decision will allow the continued operation of the Public Company Accounting Oversight Board (PCAOB) without any changes or legislative action. This narrow decision clearly severs the PCAOB board member removal process from the rest of the Sarbanes-Oxley Act (SOX) and reaffirms all provisions of the law except for the power to remove the board members. The PCAOB was put in place to achieve the goals Congress embodied in SOX. As we observed in our friend-of-the-court brief, evidence demonstrates that audit quality and investor confidence have improved since the Board's creation. The decision will prevent any disruption to the key activities of the PCAOB including setting auditing standards and the public company audit oversight process, critical factors in the continued strength and stability of our capital markets.”

Read the Supreme Court's full decision here.