Group Files Lawsuit Challenging SOX

February 8, 2006 ( - The Free Enterprise Fund has challenged the 2002 Sarbanes-Oxley Act (SOX) with a lawsuit claiming the accounting board created under the act is unconstitutional.

MarketWatch reports that the group argues the Public Company Accounting Oversight Board (PCAOB), which oversees corporate auditors, violates the Constitution because it’s not accountable to elected representatives.

The PCAOB was set up as a private-sector, non-profit corporation, but the Free Enterprise Fund says the board enjoys improper governmental powers, including the ability to enforce compliance with its own standards and other federal laws by conducting inspections of accounting firms, according to MarketWatch.

“The board is insulated in a wide range from any control from presidential oversight, from Congress,” said Mallory Factor, the fund’s chairman, in the news report.

SOX requires enhanced financial disclosure by corporations. It has been the target of protests by companies that say implementing the law’s requirements is proving too costly (See  Small Cos Won’t See SOX Implementation Costs Decline ).

“Sarbanes-Oxley costs the American people money,” said Factor. “It costs jobs. It costs our competitiveness. It hurts our markets.”   He cited a study showing compliance with the law has reduced the stock value of US companies by $1.4 trillion.

A copy of the complaint can be viewed  here .

More information can be found at .