Draft bill would eliminate PCAOB

The House Financial Services Committee is considering draft legislation that would transfer the responsibilities of the Public Company Accounting Oversight Board to the Securities and Exchange Commission. 

The bill would also end the accounting support fees that public companies and broker-dealers pay to fund the PCAOB. "The proposal would transfer the authorities of the PCAOB to the SEC," said a spokesperson for the committee. "It modifies PCAOB's authority to collect and spend accounting support fees and directs fees to be remitted to Treasury."

The PCAOB warned about making such a change. "The unique experience and expertise built up by the PCAOB over decades cannot simply be cut and pasted without significant risk to investors at a time when markets are already volatile," said PCAOB chair Erica Williams in a statement.

The bill might be included in the larger tax and spending reconciliation bill that's currently making its way through Congress, according to the Financial Times. The PCAOB has come under criticism from Republicans, including the new chairman of the SEC, Paul Atkins, who was sworn in last week. He was listed as a contributor to the Heritage Foundation's Project 2025, which called for eliminating the PCAOB and rolling back SEC regulations, and was critical of the PCAOB while he was a commissioner. 

Audit

Trump's regulatory rollback: Is the PCAOB next?

April 1, 2025 10:15 AM

Under the draft legislation, all intellectual property retained by the PCAOB in support of its programs for registration, standard-setting and inspection would be shared with the SEC and any pending enforcement and disciplinary actions of the Board would be referred to the SEC or other regulators in accordance with Section 105 of the Sarbanes-Oxley Act of 2002.

The Sarbanes-Oxley Act originally established the PCAOB in response to a wave of accounting scandals in the early 2000s involving Enron, WorldCom and other companies.

The transfer would take place within a year of the bill being enacted. Effectively on the transfer date from the PCAOB to the SEC, all unobligated fees collected under Section 109(d) of the Sarbanes-Oxley Act would be transferred to the general fund of the Treasury, and the SEC would not be able to collect fees under that section. The duties and powers of the PCAOB in effect as of the day before the transfer date, other than those described in Section 107 of Sarbanes-Oxley, would be transferred to the SEC. That section already grants the SEC general oversight of the PCAOB and the power to review the Board's actions, including general modification and rescission of Board authority.

The draft legislation says, however, the SEC may not use funds to carry out Section 107 of Sarbanes-Oxley Act for activities related to overseeing the Board. The PCAOB would have to transfer all intellectual property to the SEC, along with existing processes and regulations of the Board, including existing PCAOB auditing standards. Those would continue in effect unless they were modified through rulemaking by the SEC; and any reference to the PCAOB in any law, regulation, document, record, map or other paper of the United States would be deemed to be a reference to the SEC.

Any PCAOB employee as of the date of enactment of the bill may be offered equivalent positions on the SEC staff, as determined by the Commission, and submit to the Commission's standard employment policies; and receive pay no higher than the highest paid employee of similarly situated employees of the Commission, according to the draft legislation. That provision could in effect lower the salaries of PCAOB board members, who are some of the highest paid employees in the federal government. In 2023, PCAOB chair Erica Williams earned $672,676, while other members were paid almost $546,891, according to SEC chair Hester Peirce, a Republican member of the commission who criticized the PCAOB's "ballooning budget" in 2022.

The PCAOB believes a consolidation with the SEC would do little for the federal budget. "Folding the PCAOB into the SEC would not save a single taxpayer dollar," said a PCAOB spokesperson. "In fact, it would grow government and cost money by requiring the SEC to hire hundreds of new staff just to cover the inspections that the PCAOB conducts around the world."

The PCAOB pointed to its long-time efforts to gain access to inspect auditing firms in China and how it could be jeopardized by the legislative draft. "The PCAOB secured every concession we demanded from China in the Statement of Protocol that facilitates the PCAOB's access to inspect and investigate in China," said a spokesperson. "That agreement is not transferable. Scrapping that agreement and starting over gives China the opportunity to exploit the uncertainty in order to avoid scrutiny of its audit work once again."

The American Institute of CPAs has been monitoring the possibility of the PCAOB being folded into the SEC.

"The AICPA believes that healthy oversight of accounting firms that audit listed companies strengthens capital markets and protects the public interest," said AICPA president and CEO Mark Koziel in a statement Monday. "That oversight system involves multiple layers, including timely and transparent audit standard setting and rigorous inspections intended to drive effectiveness and expand knowledge and best practice. It also includes licensing, firm and engagement quality control requirements, and disciplinary activities at the state and federal levels. The AICPA continuously engages in activities to support ethical behavior and high-quality performance among CPAs serving the public interest and performing audits. The Auditing Standards Board sets audit standards for U.S. private companies, employee benefit plans, not-for-profit organizations and state and local governments, and attestation standards. Our initiatives include supporting the Center for Audit Quality's work to promote high-quality audits of listed companies. The AICPA is committed to supporting the drivers of audit quality needed to keep the investing public safe and provide confidence in our capital markets. We stand ready to assist policymakers as they consider potential changes to the regulatory infrastructure overseeing public company auditing."

Prior to the establishment of the PCAOB, the AICPA used to set standards for public company audits, and the PCAOB took over responsibility for the AICPA's auditing standards in 2003. PCAOB chair Erica Williams has made a priority of updating many of those standards in recent years with the encouragement of former SEC chair Gary Gensler. However, the AICPA, the Center for Audit Quality and many auditing firms have objected to several of the proposed standards and managed to either delay or derail them, including standards on firm and engagement metrics, firm reporting, and noncompliance with laws and regulations, or NOCLAR. The AICPA has continued to develop assurance and attestation standards and practice aids for private companies, but often refers to its guidance as nonauthoritative.

The PCAOB warned of the possibility of future fraud if it's folded into the SEC, which would have to set up a new inspection regime. "History tells us that when the economy is tight, risk of fraud increases," said a PCAOB spokesperson. "PCAOB inspections cannot simply be moved to the SEC without significant disruptions that could last years. Allowing audits to go uninspected while the SEC gets a new program up and running allows potential fraud to slip through the cracks, putting investors at risk at a time when the markets are already highly volatile."