Audit enforcement plummeted last year

The Public Company Accounting Oversight Board and the Securities and Exchange Commission curtailed their enforcement actions against auditors significantly in 2025, according to a new report, as the Trump administration reversed course on efforts under the Biden administration.

The report, released Thursday by the Brattle Group, found that the total number of 39 enforcement actions by the PCAOB and the SEC declined 33% from 2024 when there were 58 actions, while monetary sanctions dropped 66% to $17.9 million in 2025 from $52.2 million the previous year, with the PCAOB imposing nearly all penalties. Even though the PCAOB imposed the third-highest total penalties in its 21-year enforcement history, 84% of its actions and 98% of its penalties were brought before former PCAOB chair Erica Williams's resignation on July 22. SEC enforcement activity dropped to just two actions after former SEC chair Gary Gensler's departure on Inauguration Day and replacement by current SEC chair Paul Atkins

The two regulators together initiated 39 enforcement actions in 2025 — a 33% decrease from 2024 — while total monetary sanctions of $17.9 million fell 66% from the prior year.

"Leadership changes, evolving enforcement philosophies, and institutional disruption — particularly at the PCAOB — combined to drive a sharp decline in auditor enforcement activity in 2025, marking a turning point in the U.S. enforcement landscape," said Alison Forman, co-leader of Brattle's Accounting Practice, in a statement. "The result is a fundamentally different environment than what auditors faced just a year earlier, with implications that will extend into 2026 and beyond."

Visualization created with AI assistance based on original reporting.

The PCAOB accounted for nearly all enforcement activity, bringing 37 of the 39 actions (95%). Of those, 31 actions (84%) were initiated prior to Williams's resignation last July. SEC enforcement was limited, with only two initiated actions in 2025, one of which it brought prior to Gensler's resignation on Jan. 20, 2025.

Non-U.S. respondents accounted for 93% of total monetary sanctions, continuing a multi-year upward trend. Quality control violations figured most prominently in PCAOB actions, alleged in nearly two-thirds of matters, up from 39% during 2022–2024, while independence violations dominated the SEC's limited enforcement docket. Both SEC actions initiated in 2025 alleged violations of Regulation S-X's independence requirements. One action also alleged auditing standards violations.

The PCAOB alleged auditing standards violations in 62% of 2025 actions, down slightly from 66% during 2022–2024. As in previous years, during 2025, audit documentation and due professional care were the most frequently cited auditing standard violations, each appearing in 48% of PCAOB actions alleging auditing standards violations.

Only 8% of PCAOB actions in 2025 alleged ethics or independence violations, down from 19% from 2022 to 2024.

The report also discusses the implications of leadership changes following President Trump's inauguration, the recent PCAOB board overhaul, the delayed implementation of the PCAOB's QC 1000 quality management standard, and the SEC's newly announced Cross-Border Task Force. Forman and report co-author Adam Karageorge also draw on trends observed in 2025 to offer predictions for 2026 and beyond. They noted that the PCAOB's 2026 budget reflects a 15% reduction in funding for its enforcement division compared to 2025. On Sept. 5, 2025, the SEC announced the creation of a Cross-Border Task Force to strengthen the Division of Enforcement's efforts to identify and combat cross-border fraud that harms U.S. investors, with an initial focus on foreign companies engaged in potential U.S. securities law violations.

"To date, the Cross-Border Task Force is the only enforcement initiative announced by the SEC under Chair Atkins that directly addresses auditor accountability," said the report.