IFRS proposal from SEC likely to hit headwinds.
PCAOB Survives Legal Challenge
The Public Company Accounting Oversight Board (PCAOB) has passed legal muster. A subgroup of judges on a federal appeals court rejected a challenge to the legality of the PCAOB that alleged its Board members should be appointed by either the President of the United States or the chairman of the SEC. PCAOB Board members are appointed by all five SEC commissioners collectively. The PCAOB was created by the Sarbanes-Oxley Act of 2002 to write and enforce auditor standards.
The lawsuit was brought by the Free Enterprise Fund and Beckstead & Watts, a small Nevada accounting firm that was being investigated by the PCAOB. The plaintiffs argued that, under the Constitution, principal federal officials must be named by the President; lesser officials may be picked by a department head. The plaintiffs said the SEC can't make lesser appointments because it is a five-member body, not a department head. The majority ruling disagreed, finding that PCAOB Board members are inferior officers who may be appointed by the SEC. Sam Kazman, general counsel for the Competitive Enterprise Institute and one of the attorneys in the case, stated, "The accounting board has acted in a manner befitting an unconstitutionally structured agency, imposing incredibly excessive regulations on the American economy." While the lengthy decision was still being analyzed, a petition for rehearing by the full circuit court is likely.
In other PCAOB news, the SEC endorsed and finalized a tweak to the PCAOB's independence rules. The new rule adds a requirement that an auditor not only tell a company's audit committee about any business it does with the company and its officers, but that the auditor also should document "the substance of its discussion with the audit committee."
STEPHEN BARLAS, EDITOR
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|Title Annotation:||GOVERNMENT; United States. Securities and Exchange Commission; International Financial Reporting Standards|
|Date:||Oct 1, 2008|
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