UPDATE 3-US court to review accounting oversight board case

* Case argues law violates separation-of-powers rules

* Justices to decide case in upcoming term (Adds CEI and SEC comments)

By James Vicini

WASHINGTON, May 18 (Reuters) - The Supreme Court said on Monday it would decide a constitutional challenge to the 2002 law that created a national board to oversee U.S. public company auditors.

The justices agreed to review a ruling by a U.S. appeals court that upheld the Sarbanes-Oxley Act of 2002, which set up the private sector Public Company Accounting Oversight Board.

A conservative activist group called the Free Enterprise Fund and a small Nevada accounting firm appealed to the Supreme Court in arguing that the law violated constitutional requirements on separation of powers because it failed to allow adequate control of the board by the U.S. president.

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

A board spokeswoman said: "We remain confident that the PCAOB's structure is constitutional and look forward to our opportunity to demonstrate that in the Supreme Court."

The Sarbanes-Oxley corporate reform law created the board in response to auditing scandals early in the decade that involved Enron Corp and other companies.