Washington, D.C., June 28, 2010 — Today the Supreme Court issued its decision in Free Enterprise Fund and Beckstead and Watts, LLP v. Public Company Accounting Oversight Board and United States of America.
In its decision, the Supreme Court held that the restriction on removal of Board members under the Sarbanes-Oxley Act of 2002 violates separation of powers principles, but found that the provision was severable from the remainder of the Sarbanes-Oxley Act. The Court stated that the Act “remains fully operative as a law” with the for-cause restrictions excised, leaving the members of the PCAOB subject to removal by the Commission without restriction. The opinion does not call into question any action taken by the PCAOB since its inception.
“I am pleased that the Court has determined that the Board’s operations may continue and the Sarbanes-Oxley Act, with the Board’s tenure restrictions excised, remains fully in effect. The PCAOB is a cornerstone of the Sarbanes-Oxley Act and serves a critical role in promoting investor protection and audit quality,” said SEC Chairman Mary L. Schapiro. “We look forward to continuing to work with the Board in connection with its mission to oversee auditors in order to protect the interests of investors and further the public interest in the preparation of informative, accurate and independent audit reports.”
The Sarbanes-Oxley Act of 2002 established the PCAOB, and the Act provides the SEC with oversight authority over the PCAOB. “It is important to understand that the PCAOB’s auditing standards, as approved by the Commission, continue to apply,” said James L. Kroeker, the SEC’s Chief Accountant. “Audit firms are required to be registered with the PCAOB and they remain subject to inspections.”