For those of you that don't religiously follow the happenings over at the SCOTUS, we'll remind you that oral arguments are being heard today in Free Enterprise Fund and Beckstead and Watts, LLP v. Public Company Accounting Oversight Board. The issue before the court, according to SCOTUS Wiki:
Whether the Sarbanes-Oxley Act is consistent with separation-of-powers principles – as the Public Company Accounting Oversight Board is overseen by the Securities and Exchange Commission, which is in turn overseen by the President – or contrary to the Appointments Clause of the Constitution, as the PCAOB members are appointed by the SEC.
An op-ed in today's Wall St. Journal ignores the "legal hairsplitting" of the case and instead focuses primarily on the cost that companies have taken on implementing Section 404:
In 2003 the SEC estimated that the average company could do much of its internal controls work for $91,000 per year. In 2007, the commission acknowledged costs had gotten out of hand, particularly for smaller companies, and told the PCAOB to make the internal controls audits more cost-effective. In 2008, the SEC's Office of Economic Analysis launched a survey of public companies to judge the results, and it recently posted the findings on the SEC Web site, after collecting data from thousands of corporations. Section 404 is still consuming more than $2.3 million each year in direct compliance costs at the average company. The SEC's survey shows the long-term burden on small companies is more than seven times that imposed on large firms relative to their assets. Are the internal controls audits helpful? Among companies of all sizes, only 19% say that the benefits of Section 404 outweigh the costs. More respondents say that it has reduced the efficiency of their operations than say it has improved them. More say that Section 404 has negatively affected the timeliness of their financial reporting than say it has enhanced it.
Not surprisingly, The Journal (specifically James Freeman) is pulling for the Plaintiffs in this case without presenting any of the positive contributions of SOx. Ultimately, the nine justices will determine the fate of the PCAOB, which if found unconstitutional, could have wide repercussions on all the auditors out there. We just spent the better part of a decade getting this SOx stuff down, and now it's possible that it could've been a giant waste of time. Makes you feel good, doesn't it? For those of you interested in this case further, you can hear the oral presentations via podcast, over at SCOTUS Blog. We invite our legal friends with perspective on this case to share their insights and predictions on this case. Hell, even if you're not a legal scholar, share your thoughts. And just for fun, take a stab on what you think the outcome of the case will be by voting in the poll below.