PCAOB is ruled constitutional in a 2-1 court decision

  • PCAOB (US Public Company Accounting Oversight Board) (dark gray) Image

23 Aug 2008

On 22 August 2008, the United States Court of Appeals for the District of Columbia Circuit released its decision in the case Free Enterprise Fund, et. al. v. Public Company Accounting Oversight Board (PCAOB).

The Free Enterprise Fund had challenged the legality of the PCAOB under the US Constitution. Judge Rogers wrote the opinion for the court, with Judge Kavanaugh dissenting. Here is an excerpt from the opinion:

We hold, first, that the Act does not encroach upon the Appointment power because, in view of the [Securities and Exchange] Commission's comprehensive control of the [Public Company Accounting Oversight] Board, Board members are subject to direction and supervision of the Commission and thus are inferior officers not required to be appointed by the President. Second, we hold that the for-cause limitations on the Commission's power to remove Board members and the President's power to remove Commissioners do not strip the President of sufficient power to influence the Board and thus do not contravene separation of powers, as that principle embraces independent agencies like the Commission and their exercise of broad authority over their subordinates. Accordingly, we affirm the grant of summary judgment to the Board and the United States.

Click to download the Full Text of the Court Decision (PDF 252k). The decision is 92 pages in length, of which 57 pages is Judge Kavanaugh's dissenting opinion. In Judge Kavanaugh's view, the 'PCAOB's structure unconstitutionally restricts the President's appointment and removal powers'. Click for:


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