Un-Constitutionality of the PCAOB and Sarbanes Oxley Act (SOX); and the Failure of SOX

18 Pages Posted: 15 Feb 2011 Last revised: 21 Jan 2018

Date Written: February 14, 2011


The existence and current operations of Public Company Accountability Oversight Board (the "PCAOB"; which was created pursuant to the Sarbanes Oxley Act of 2002) is un-constitutional. PCAOB monitors and regulates the accounting firms that conduct external audits of companies in the US, and hence has a significant effect on reported risk, regulation of risk and perceptions of risk in markets. Bader & Berlau (Competitve Enterprise Institute) (Oct. 2005), Russell (June 28, 2010), and Shapiro & Cushman (Dec. 5, 2009) explain how the existence and operations of PCAOB are un-constitutional. The US Supreme Court's decision in Free Enterprise Fund v. PCAOB, was limited to a narrow range of issues and it impliedly concurred with the enabling SOX statutes that created PCAOB, which was error. The PCAOB performs legislative, investigative and adjudicative functions simulatanously, all of which taken together, constitute a violation of the Separation of Powers clause. The un-constitutionaility of the EESA and the PCAOB are an example of the far-reaching effects of state and federal constitutions on risk regulation. This Chapter explains why the PCAOB abd SOX are un-constitutional.

Keywords: PCAOB, SOX, Constitutional Economics

Suggested Citation

Nwogugu, Michael C. I., Un-Constitutionality of the PCAOB and Sarbanes Oxley Act (SOX); and the Failure of SOX (February 14, 2011). Available at SSRN: https://ssrn.com/abstract=1761731 or http://dx.doi.org/10.2139/ssrn.1761731

Michael C. I. Nwogugu (Contact Author)

Independent ( email )

P. O. 996
Newark, NJ 07101
United States

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