The U.S. Supreme Court is hearing opening arguments in a case that questions some central tenets of the Sarbanes-Oxley Act (SOX).

The case, filed by Henderson, Nevada-based accounting firm Beckstead and Watts and the Washington-based conservative activist-group The Free Enterprise Fund, disputes the authority of the Public Company Accounting Oversight Board (PCAOB).

The PCAOB is a private, nonprofit corporation created by SOX tasked with overseeing the auditors of public companies and protecting investors by promoting independent audit reports. The plaintiffs argue that the PCAOB violates the constitution’s "separation of powers" and "appointments” clauses because it is directly accountable to the Securities and Exchange Commission and not the President.

A U.S. federal judge dismissed the lawsuit in 2007, and the Washington-based U.S. Federal Circuit Court of Appeals rejected an appeal in 2008.

Created in the wake of accounting scandals at Enron and WorldCom, SOX is also being questioned on the legislative front. In November, the House Financial Services Committee approved an amendment to the Investor Protection Act of 2009 that would exempt small businesses from Section 404 of SOX.

“Although the stated intent of Sarbanes-Oxley was to provide investor confidence in our markets through greater accountability and disclosure, the Act has had the unintended effect of creating undue—and often unbearable—burdens on small businesses,” Rep. Scott Garrett (R-N.J.) said in a statement. “There is a place for Federal oversight, but the weighty cost of compliance under Section 404 is slowly strangling small businesses.”

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