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Watchdog Knocks SOX The Public Company Accounting Oversight Board (PCAOB) is being challenged by an accounting firm and the Free Enterprise Fund, a pro-market watchdog. The PCAOB is a nominally private sector corporation created by the Sarbanes-Oxley Act (SOX) to oversee the auditors of public companies. The PCAOB is regulatory chimera; it combines the regulatory function of government agency with the form of a private sector organization. Although the hybrid entity acts as a regulatory agency, it does not have the associated accountability, including the need to adhere to the "good government" laws such as the Paperwork Reduction Act and the Data Quality Act. Despite being organized as a non-profit corporation, the Board's members are selected by the government, not the private sector as is the case with Self-Regulatory Organizations such as the New York Stock Exchange. The legal challenge to the PCAOB focuses on whether the Board's members being selected by the SEC, not the President, violates the appointments clause of the Constitution. While this is a significant issue, it is one that will take years to resolve. The SEC can take immediate action to ensure PCAOB accountability and stakeholder recourse without any legislative or judicial intervention. Specifically, the SEC should require that the PCAOB apply the Paperwork Reduction Act and the Data Quality Act and to the Board's information collection and dissemination activities.
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