<?xml:namespace prefix = st1 ns = “urn:schemas-microsoft-com:office:smarttags” />Washington, D.C., October 4, 2005—The federal board charged by the Sarbanes-Oxley Act of 2002 with keeping corporate accountants honest currently wields an unconstitutional degree of unchecked power over the nation’s public companies, according to a new study published today by the Competitive Enterprise Institute.<?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />
Co-authors Hans Bader and John Berlau point out that the Public Company Accounting Oversight Board, created by Congress as part of Sarbanes-Oxley, violates the Appointments Clause of the Constitution, which calls for federal officials with significant authority to be appointed by the President or the single “head” of a Cabinet-level department. Members of the PCAOB are currently appointed jointly by the commissioners of the Securities and Exchange Commission.
“The PCAOB, known not-so-affectionately in the business community as ‘Peekaboo,’ has broad powers to impose regulations controlling the auditing of all public companies,” write Bader and Berlau. “It … can fine an accountant up to $100,000 or an accounting firm up to $2 million for a single, inadvertent violation of its rules. Magnifying the PCAOB’s power is its authority to … micromanage corporations’ internal controls, including matters only tangentially related to financial statements.”
“But the PCAOB’s clearest and most important [Constitutional] violation is in how its members are appointed,” Bader and Berlau continued. “The Founders regarded the Appointments Clause as one of the Constitution’s most crucial provisions. They may not have been able to envision anything like the PCAOB, but experience from England taught them all too well about abuses that could result from the government's unchecked power to create offices and appoint officers.”