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CEI Takes on Unconstitutional Agency in Court

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CEI Takes on Unconstitutional Agency in Court

Federal Accounting Board Itself Unaccountable

Washington, D.C., April 15, 2008—Today, as Americans scurried
to get their tax forms into the IRS, the D.C. Circuit Court of Appeals heard
arguments about another agency that can impose big fines and reams of paperwork
on small businesses. The very structure of this agency makes the IRS look like
a model of accountability, the Competitive Enterprise Institute and others
argued in court.

The Sarbanes-Oxley Act of 2002 created the Public Company
Accounting Oversight Board, giving it authority to set accounting standards,
impose its own set of taxes, and open investigations of accounting firms big
and small. Yet unlike counterparts wielding similar authority, such as the IRS
commissioner and Federal Reserve governors, PCAOB members are never vetted by
the President or by the Senate, as neither of these bodies have a say in who
will be appointed.

In today’s oral argument in Free Enterprise Fund v. PCAOB, attorneys for the Jones Day law firm
and for the Competitive Enterprise Institute asked a three-judge panel – consisting
of the Hon. Brett Kavanaugh, Judith
Rogers, and Janice Rogers Brown – to declare the PCAOB unconstitutional under
the Appointments Clause of the U.S. Constitution. This clause requires that officers
of the United States,
wielding the authority the PCAOB does, be appointed by the president and
confirmed by the Senate. This process helps ensure agencies remain accountable
to elected officials and ultimately the American people.

The PCAOB’s interpretation of Sarbanes-Oxley’s section 404
has cost public companies more than $35 billion a year and has proved
especially burdensome to smaller public companies. Bipartisan critics have observed
that the PCAOB standards have burdened firms with minutiae while overlooking
many of the practices that led to the subprime shenanigans.

As accounting issues become of increasing importance to the
electorate, it’s imperative that the PCAOB be accountable to elected officials.
“Next year – whether it’s President McCain, President Clinton, or President
Obama – America’s
new president should not be faced with a powerful government body that lacks
accountability to them and members of Congress,” says John Berlau,
director of CEI’s Center for
Entrepreneurship. “Unaccountable government makes the American people the
ultimate losers.”

For more background on the legal issues underlying today’s
arguments, see CEI’s study: The Public Company Accounting
Oversight Board: An Unconstitutional Assault on Government Accountability

by John Berlau and Hans Bader.

CEI is a non-profit, non-partisan
public policy group dedicated to the principles of free enterprise and limited
government. For more information about
CEI, please visit our website at www.cei.org.