There is no shortage of criticism for Sarbanes-Oxley.
On Monday, the court will hear Free Enterprise Fund v. Public Company Accounting Oversight Board, which could result in the death or scaling back of the law that created the board that oversees the auditing industry.
Created in the wake of the Enron scandal, SOX changed the accounting industry from a self-regulated one to governed by the PCAOB, a private organisation with governmental-type functions.
Critics find it to be overburdensome — none, perhaps more vocal than The Wall Street Journal’s editorial board, who today called it the “last great Congressional overreaction.”
The case in front of the court has nothing to do with the substance of the law or the Board’s activities, but instead asks the court to visit challenging and far-reaching constitutional questions involving the separation of powers.
Legendary Supreme Court reporter Lyle Dennison has a lengthy analysis of the separation of powers question on SCOTUSblog, but the baseline issue is whether the fact that the president has no right to choose PCAOB members or exercise power over their operations makes it unconsitutional.
Greg Stohr and Ian Katz also have full coverage and background information for Bloomberg.
The government urges that the constitutional issues are not ripe because the challengers should have first made their complaints through the PCAOB administrative complaint process.
It’s difficult to predict which way the Court will go, and the Court may wish to completely avoid wading into these “profound constitutional issues,” as Dennison calls them.
But SOX detractors will be watching the outcome, no matter how the Court gets there.
It does not mean the rules included in SOX will go away, but that Congress may have to rewrite them. That, of course, will open the doot for all sorts of amendments to the law.
Bloomberg points to one of the main tenets of the law that one representative is already promising to revisit — Scott Garret of New Jersy intends to reevaluate the requirement that top company officials sign off on financial statements.
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