March 22, 2007 / 2:02 AM / in 12 years

UPDATE 1-Court upholds US audit watchdog panel in lawsuit

(Recasts with PCAOB comment)

WASHINGTON, March 21 (Reuters) - A U.S. court on Wednesday ruled against a conservative activist group that had sought in a lawsuit to shut down a national watchdog board overseeing the audit industry on the grounds that it is unconstitutional.

The Free Enterprise Fund said in a statement that the District Court for the District of Columbia ruled in favor of the watchdog, the Public Company Accounting Oversight Board, in a lawsuit filed last year by the fund and a small audit firm.

The fund contended that the PCAOB violates separation of powers principles as a semi-government agency lacking proper checks and balances. The PCAOB was created under 2002’s post-Enron Sarbanes-Oxley accounting reforms.

“The Sarbanes-Oxley Act is onerous and burdensome. It is also deeply unconstitutional. With all respect to the District Court, we will continue to press our important cause in the Court of Appeals and the Supreme Court,” said fund co-counsel Kenneth Starr, a former U.S. independent counsel who gained fame investigating President Bill Clinton.

The PCAOB polices the U.S. audit industry, including the Big Four firms that review the books of major corporations: Ernst & Young [ERNY.UL], KPMG [KPMG.UL], PricewaterhouseCoopers [PWC.UL], and Deloitte & Touche [DLTE.UL].

“We are pleased with the court’s decision and look forward to continuing to fulfill the mandate given us by Congress to protect the interests of investors,” the PCAOB said in a statement.

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