The Competitive Enterprise Institute (CEI) and the Free Enterprise Fund on February 7, 2006 launched a constitutional legal challenge to the Public Company Accounting Oversight Board (PCAOB), which was created by Congress as part of the Sarbanes-Oxley Act of 2002.
Sarbanes-Oxley was rushed into law following a spate of corporate scandals. The PCAOB was then formed to “oversee the audit of public companies that are subject to the securities laws.” In carrying out this mandate, the board exercises broad governmental power, including the power to “enforce compliance” with the Act and the securities laws, to regulate the conduct of auditors through rulemaking and adjudication, and to set its own budget and to fund its own operations by fixing and levying a tax on the nation’s public companies.
The board wields great power over the businesses it regulates, and its regulations and mandates have produced costly and unintended consequences for publicly traded U.S. businesses, entrepreneurs and capital markets. ,Yet it is entirely unaccountable to any elected official. The board’s five members are
appointed for five-year terms, not by the President or the head of an executive branch, but by the Securities Exchange Commission (SEC).
The lawsuit alleges, in part, that the PCAOB violates the appointments clause (Article II Section 2) of the U.S. Constitution, which grants the power to appoint high level government officials to the President, the courts, or the heads of departments-- not a regulatory commission like the SEC.
The case, Free Enterprise Fund v. The Public Company Accounting Oversight Board, was filed in U.S. District Court for the District of Columbia. Plaintiffs include the Free Enterprise Fund and Beckstead and Watts, LLP.
The Free Enterprise Fund is a Section 501(c)(4) organization based in Washington, DC that advocates pro-growth economic policies, such as tax relief, tax reform,
fiscal restraint, and limited government.
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Plaintiff Brad Beckstead |
Beckstead and Watts, LLP, is a CPA firm headed by G. Brad Beckstead. Mr. Beckstead is a CPA licensed in the state of Nevada since 1995. Beckstead and Watts is a small firm specializing in the audit of US publicly-held companies. The firm has serviced in excess of 100 clients since 1999. Beckstead and Watts, LLP is a member of the American Institute of CPA’s Center for Public Company Audit Firms and is registered with the Public Company Accounting Oversight Board. Before starting the firm Beckstead and Watts, LLP, Mr. Beckstead was Chief Financial Officer of a Las Vegas-based telecommunications company and president of a small consulting firm providing accounting and report writing for small publicly-held companies. Mr. Beckstead is a former staff auditor with the San Francisco, California office of the US national CPA firm Deloitte and Touche, LLP.
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