Lawsuit Threatens Sarbanes-Oxley Act

If the appeals court does throw out PCAOB, what happens next? Beckstead asked the court to stop the board dead in its tracks. More likely, the court would allow a stay of its decision while the case is appealed to the Supreme Court.

In theory, Congress could respond just by changing the structure of PCAOB's board. In practice, Sarbanes-Oxley will be opened to all the business interests that hope to hollow it out. "It turns into a food fest," says Lynn Turner, former chief accountant for the SEC.

For example, small businesses want to be exempted from the audit rules requiring better financial controls. That would amount to a thumb in investors' eyes. "The smaller the company, the more likely fraud is to occur," says James Cox, a law professor at Duke University. Auditing rules could be simplified, but no public company should get a free pass.

Foreign companies would seek more exemptions, too. Chief executives and chief financial officers would try to escape from having to attest to the integrity of their company's internal controls -- never a good sign. The new rules defending auditor expertise and independence could be lost.

If the court supports PCAOB, Beckstead may appeal to the Supreme Court. Sarbanes-Oxley still won't be out of the woods.

Jane Bryant Quinn, author of "Smart and Simple Financial Strategies for Busy People," is a Bloomberg News columnist. Alexis Leondis in New York contributed to this column.