The case before the Supreme Court brought a lot of conflicting opinions and divergence of opinion as many people consider the contentious issues presented in the case matter of public importance that needed to be sought with constitutionality and clarity it deserves. There has been precedence about constituting of public boards and the question of presidential powers and control as enshrined in the constitution, which remains the highest weapon of justice in the US. As witnessed in the case, there were no outright decisions from the arguments presented in the case. The topic of public audit and control over publicly owned companies has been in existence for reasonable periods. With the failure and subsequent collapse of WorldCom and Enron, the Sarbanes-Oxley Act came into action following the enactment of by the Congress (Bailey, 2014). It placed tough measures and corporate governance on public institutions and accounting firms. The introduction of the Act enhanced the investor confidence, but questions about the compliance costs still exist as its bureaucratic paperwork requirements.
There was also considerate calming in the financial markets. With legal suits challenging the constitutionality and legitimacy of the PCAOB, there were issues besides the legal liability of auditors in the hands of the Board that was operating under the mercy of the SEC. In this regard, the constitution of the board was seen as a contravention of the appointments regulations. The regulation and clauses regarding appointments in the US vested the powers to constitute and oversight on commissions on the President. It thus makes it clear that the legality of the appointment was in blatant contravention of the constitution. Despite the concerns around this appointment, the legislators deemed it appropriate (Bailey, 2014). In their argument, SEC was considered the head of the department and had the jurisdiction to oversight over the board despite the separation of power issues.
Should members of PCAOB be taken from the investment community?
Numerous opinions have been fronted on composition of PCAOB. The constitution makes it a requirement that the appointments should have come from the investment community; there are constitutional loopholes that are subject to contextual interpretation and thus makes the decision to choose from elsewhere legitimate. The members should not have come from the investment community. It is retroactively incoherent to give members of the investment community have the mandate to oversight over irregularities and the misdoings of the financial sector (Bailey, 2014). One fact is that the law renders self-jurisdiction illegitimate. Being part of the body upon which oversight is constituted, it is critical to avoid entrusting such parties with the mandate to bring sanity to the sector. As stipulated in the law, one has no moral authority to be a judge in their case. It is clear that such members would be cluttered with indefinable interests thus making them unfit for such position. The position requires that the executioners have some level of autonomy and can exercise their minimal mandate interference.
It is imperative that issues about the practice of financial institutions be checked by independent parties so as to quash away the narrative of interest. It is paramount to for organizations behave in a manner that holds integrity, and that can only be provided when the oversight is conducted by an independent body. Having people from the investment community appointed as members of PCAOB would have dire consequences on the fight for corporate sanity (Flesher & Sharp, 2014). The very institutions that exercise questionable financial behavior cannot be entrusted with the duty to monitor themselves. Therefore, it would not be right for the members of PCAOB to come from the investment community. Moreover, the members of the investment community have certain organizational policies that would tie them to observing and upholding the image of their associated organizations, as a result, it would be detrimental to the oversight mandate they are expected to run rule over. In this view, the members might act in the interest of their institutions, and that can hurt the intended justice and covertly uphold interests. Also, there is always rivalry among companies, and this might be an opportunity for these members to bring down their competitors even through smear campaigns and witch hunt. Such moves would seriously harm the integrity of the body. Through this, certain organizations might go away with criminal financial practices thus override the purpose of the constitution of the Commission. Therefore, it would be inappropriate to appoint from the investment community.
Impact of the validity of the Board and other provisions of the Sarbanes-Oxley Act
The question of legitimacy in the case had presented before the Supreme Court was a matter of huge corporate interest and as witnessed in the numerous headlines in the country at the time, several corporate players and companies were in anticipation that the court would render the Act illegitimate (Flesher & Sharp, 2014). However, in contrast to the expectation of many interests, the court ruled to uphold the act. Had the court ruled that it was unconstitutional, the whole act would be rendered unconstitutional. However, making it legitimate was a step forward in the fight against financial fraud. The prevalence of criminal financial practices in the financial sector requires close regulation and monitoring. The Board is mandated to be under the surveillance of the SEC which can dismantle it under a cause. The Board can exercise continuity of the mandates and are subjected to removal at will by SEC. the ruling thus fixed the constitutionality of the PCAOB. The decision meant that post-Enron reforms were not undermined. The reforms have served the financial markets in conformity to the expectations.
References
Bailey, A. D. (2014). Perspectives on the Public Company Accounting Oversight Board (PCAOB) 2004–2005. Accounting Horizons, 28(4), 889-899. Retrieved March 5, 2016.
Flesher, D. L., & Sharp, A. D. (2014). Recalling the Public Oversight Board (1977–2002) and winners of the John J. McCloy Award. Research in Accounting Regulation, 26(2), 204-211. Retrieved March 5, 2016.
