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    The PCAOB Meets the Constitution: The Supreme Court to...
    research summary posted March 11, 2015 by Jennifer M Mueller-Phillips, tagged 01.0 Standard Setting, 01.06 Impact of PCAOB, 04.0 Independence and Ethics 
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    Title:
    The PCAOB Meets the Constitution: The Supreme Court to Decide on the PCAOB’s Conformity with the Separation of Powers Doctrine and Appointments Clause
    Practical Implications:

    From a policy point of view, the case highlights the importance of the combination of independence and accountability for auditing and accounting standard setting and practice. The implication of the Supreme Court’s decision about the constitutionality of the PCAOB is three folds: 1. the future of auditing oversight; 2. the validity of SOX; 3. the future of independent agencies in general.

    Citation:

    King, R. R. 2010. The PCAOB Meets the Constitution: The Supreme Court to Decide on the PCAOB's Conformity with the Separation of Powers Doctrine and Appointments Clause. Accounting Horizons 24(1): 79-93.

    Purpose of the Study:

    This commentary provides an overview of the case that came before the U.S. Supreme Court that alleges constitutional problems with the Public Company Accounting Oversight Board (PCAOB). In 2002, Congress established PCAOB as a private-sector, non-profit organization, and gave oversight powers to the Securities and Exchange Commission. The plaintiffs in the case allege that Congress empowered the PCAOB with broad executive powers, yet limited the President’s ability to appoint Board members, thus violating the appointments clause of the Constitution" and to control and/or remove Board members thus violating the separation of powers doctrine of the Constitution.

    This case raises questions about independence and accountability for the future of auditing oversight. Congress’s attempt to provide for independence of the PCAOB may turn out to violate the accountability of the Executive Branch of the federal government that is required by the Constitution. The Supreme Court’s decision in the Spring of 2010, has the potential to affect not only the PCAOB, but more broadly, SOX, and the oversight architecture of all federal government agencies.

    Therefore, the purpose for this commentary is to provide a synopsis of the FEF/BW case for accounting academics to fully understand the debate and the issues behind it. 

    Design/Method/ Approach:

    The authors used case study method, and address the research purpose following four sections: 1) summary of the PCAOB and the oversight mechanisms of the SEC; 2) overview of the players and the timeline of the FEF/BW case; 3) outline of the constitutional issues; and 4) discussion about Supreme Court’s possible rulings and future research possibilities,

    Findings:

    This commentary provides an overview of the case currently before the U.S. Supreme Court that alleges constitutional problems with the Public Company Accounting Oversight Board. 

    Category:
    Independence & Ethics, Standard Setting
    Sub-category:
    Impact of PCAOB