Those waiting for the answer to whether the Sarbanes-Oxley Act is unconstitutional may not have to wait long. The U.S. Supreme Court is expected to soon reveal its decision, which could significantly impact U.S. accounts payable departments.
According to a report published by the Journal of Accountancy, the U.S. Supreme Court will likely announce its decision in the case, Free Enterprise Fund v. Public Company Accounting Oversight Board, before the end of its current session on June 28.
The case began last year when Free Enterprise Fund, a non-profit, free-enterprise advocacy group, teamed up with CPA firm Beckstead and Watts LLP to file suit against the Public Company Accounting Oversight Board, which was created to enforce provisions of the Sarbanes-Oxley Act of 2002.
Plaintiffs in the case believe the PCAOB is unconstitutional. Specifically, they argue that the organization violates the appointments clause Constitution, which gives the President the power to appoint and remove officials in federal agencies. Currently, the Securities and Exchange Commission appoints PCAOB officials.
If the Supreme Court finds the PCAOB unconstitutional, there is a chance that the entire Sarbanes-Oxley Act could be taken down with it. SOX does not include language allowing for the act to remain intact without the existence of the PCAOB. If one goes, so goes the other. However, according to the Journal of Accountancy article, if the Supreme Court rules against the PCAOB, it will likely not overturn SOX.
In addition to believing the PCAOB, and by extension SOX, is unconstitutional, the plaintiffs have an ulterior motive. Their goal is to overturn the act completely.
“The costs to comply with the Sarbanes-Oxley Act of 2002 are a ‘barrier to entry’ for small entrepreneurial and developing companies,” says Beckstead and Watts Managing Partner Brad Beckstead’s web site. “Inclusive in those costs are the regulatory burdens for auditors of small companies to comply with the standards established by the PCAOB.”
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