CalPERS, TIAA-CREF Defend Constitutionality of PCAOB

In a powerful amicus brief, national public interest groups have strongly defended the constitutionality of the PCAOB. The Council of Institutional Investors, CalPERS, and TIAA-CREF, among others, asserted that the PCAOB sits firmly and comfortably within the long-established constitutional framework of the modern administrative state. In a brief of broad themes, amici contended that the PCAOB incorporates the lessons learned through decades of experience with a deficient system of self-regulation in the accounting profession. In addition, the interest groups emphasized that the Board was carefully designed and given enough authority to carry out its mission while at the same time subjected to sufficient checks to preserve public confidence that investor interests are at the heart of that mission. Ira Millstein and former SEC Commissioner Harvey Goldschmid were of counsel on the brief.

An essentially broken self-regulatory regime creaked toward the new century as nominal overseer of an accounting and auditing profession that was being radically transformed, argued the brief. As audit fees declined, noted the interest groups, audit firms began offering a lucrative mix of non-audit services that threatened auditor objectivity. Enron and other major business frauds confirmed beyond any doubt the inability of the vintage self-regulatory system to effectively supervise the present day accounting industry. At the same time, there arose the legislative will to create the independent and publicly accountable PCAOB with real power to inspect auditors and enforce compliance.