Is the Public Company Accounting Oversight Board Constitutional?
April 2, 2003Erika C. Birg
In the highly publicized and recently enacted Public Company Accounting Reform and Investor Protection Act of 2002, S. 2673, 107th Cong., also known as the Sarbanes-Oxley Act of 2002 (the "Act"), Congress provides for the creation of a Public Company Accounting Oversight Board (the "Board"), to oversee public company audit functions and, it is hoped, to prevent further accounting scandals such as the "Enron" problem. The members of the five-person Board are to be appointed by the Securities and Exchange Commission ("SEC"), with the idea that this Board will be "independent," and "will set clear standards to uphold the integrity of public audits, and have the authority to investigate abuses and discipline offenders." George W. Bush, July 30, 2002 speech, (last visited Sept. 9, 2002). As shown more fully below, however, Congress’s desire to create an "independent" Board under the auspices of the SEC actually may run afoul of the Appointments Clause, U.S. Const. Art. II, § 2, cl. 2, rendering the Board unconstitutionally created.