WASHINGTON - The Supreme Court heard arguments yesterday on part of the antifraud law enacted in response to the corporate scandals early this decade at Enron Corp. and other big companies.

The case involves the composition of the board created to tighten oversight of internal controls and outside auditors following accounting scandals at Enron, WorldCom Inc., Tyco International Ltd., and others.

A small Nevada accounting firm and an antitax group brought the challenge to the 2002 Sarbanes-Oxley law, arguing that the board created by the law violates the Constitution's separation-of-powers mandate because the president cannot directly appoint or remove its members.

The board wields too much unchecked power, Michael Carvin, the challengers' lawyer, told the court.

The Securities and Exchange Commission, an independent federal agency, appoints the chairman and four directors of the Public Company Accounting Oversight Board. The accounting board is funded by fees on publicly traded companies according to their size.

Congress created the board to replace the accounting industry's own regulators amid the business scandals, giving it power to require documents and testimony from accounting firms, and the authority to discipline accountants.

In addition to the oversight board, the 2002 law required greater financial disclosures and increased the criminal penalties for securities fraud. Parts of the law unrelated to the accounting oversight board are not threatened in this case.

Business interests, especially smaller public companies, have complained about the costs of complying with the law's requirement for companies to file reports on the strength of their internal financial controls and fix any problems.

A pending House bill would free smaller publicly traded companies from the board's oversight. Some advocates for declaring the board unconstitutional believe it would be easier to make other changes in the Sarbanes-Oxley law if Congress, responding to a court decision, has to change how board members are appointed and may be removed.

The Obama administration and the board argued that it was constitutional because the president had ample authority to control what the board did, through the SEC.

A decision in Free Enterprise Fund v. Public Company Accounting Oversight Board is expected by spring.