Insurers hoping for a reprieve from complying with the requirements of the Sarbanes-Oxley Act of 2002, had their hopes dashed as the U.S. Supreme Court unanimously rejected a challenge to the law’s constitutionality.
Passed in the wake of the Enron and WorldCom accounting scandals, SOX established the Public Company Accounting Oversight Board (PCAOB) to oversee the auditors of publicly traded firms. The plaintiffs in the case, the Free Enterprise Fund and accounting firm Beckstead and Watts, had challenged the legality of the PCAOB because its members were appointed by the Securities and Exchange Commission, rather than by the president.
The former legislators who sponsored the legislation, Paul Sarbanes and Michael Oxley, issued a statement hailing the ruling.
“The PCAOB provides essential protections to the more than half of American households that invest savings in securities,” they said. “It ensures the integrity of public company audits and, thereby, the accuracy of financial reporting. The PCAOB enjoys widespread support from investors as well as from the accounting profession. The decision from the Supreme Court adjusts the law in a way that allows the PCAOB to continue to ensure the integrity of public company audits.”
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