The House Financial Services Committee is currently reviewing draft legislation that would eliminate the Public Company Accounting Oversight Board (PCAOB). If enacted, the bill would transfer the PCAOB’s current responsibilities to the Securities and Exchange Commission (SEC). This proposal is part of a broader deregulatory initiative supported by Republican lawmakers and the Trump administration.
Key provisions
The PCAOB was established in 2002 under the Sarbanes-Oxley Act to restore investor trust following the Enron corporate fraud scandal. Congress granted it the authority to oversee audits of public companies. The proposed bill — the Streamlining Public Company Accounting Oversight Act—would:
- Transfer all regulatory and enforcement functions of the PCAOB to the SEC within one year of the bill’s enactment, and
- Eliminate the fees that public companies and broker-dealers pay to fund the PCAOB.
Removing these fees could lead to modest savings, particularly for smaller public companies. However, costs could shift, not disappear, if the SEC imposes alternative compliance measures.
If enacted, the bill would represent a significant shift in the U.S. financial regulatory landscape, centralizing audit oversight within the SEC and potentially altering the dynamics of corporate financial accountability. Notably, CPAs performing public company audits would no longer be subject to PCAOB inspections and enforcement. Instead, the SEC would take over these responsibilities, which could change the tone and scope of inspections and lead to differences in enforcement priorities. Depending on the SEC’s enforcement strategy, the transition could result in relaxed or intensified scrutiny.
In addition, the PCAOB currently develops audit standards for public companies that differ somewhat from those issued by the American Institute of Certified Public Accountants (AICPA). Transitioning this role to the SEC might delay or alter ongoing standard-setting projects, such as recent proposals around audit firm governance, quality control and risk assessments.
Stakeholder reactions and concerns
The proposal has elicited mixed reactions. Proponents argue that the proposed changes would reduce redundancy between the PCAOB and SEC, streamline regulatory oversight and cut government spending. In particular, the high salaries of PCAOB board members have been highlighted as a point of concern.
Some public companies and their financial advisors see PCAOB enforcement actions as overly aggressive under its current leadership. In particular, some smaller public companies think the current enforcement approach is misaligned with business risk realities and favor the proposal as a way to reduce costs and perceived bureaucratic overreach.
The AICPA has historically supported the PCAOB’s mission and hasn’t endorsed its elimination. However, recent PCAOB regulatory actions have raised concerns. In a December 2024 comment letter, the AICPA urged the SEC to reject proposed rules on audit firm and engagement metrics. The letter cited potential burdens on small and midsized firms and unintended negative consequences for U.S. capital markets and investors. The letter advocated for alternative approaches that balance transparency, cost and the needs of audit committees while supporting audit quality.
On the other hand, some stakeholders strongly oppose dissolving the PCAOB, viewing it as a step backward. Opponents are concerned about regulatory instability and investor trust erosion. Many publicly traded firms, especially those with global operations, worry that the bill would reduce audit quality, causing the United States to lose its credibility in capital markets.
Investor advocates, such as the CFA Institute, have warned that dismantling the PCAOB could weaken the independent oversight that has been crucial in maintaining audit quality since the early 2000s. They emphasize the need for a strong, apolitical and independent audit regulator to ensure the integrity of financial reporting.
PCAOB Chair Erica Williams has defended the board’s recent initiatives, which include imposing record fines and implementing new audit quality standards. She asserts that these measures are data-driven and prioritize investor protection.
Possible effects on private businesses
If approved, the proposal to eliminate the PCAOB would have a limited direct effect on private companies. These organizations aren’t subject to PCAOB oversight unless they have public debt, are planning an initial public offering (IPO) or engage in SEC-regulated activities. Private company auditors generally follow AICPA auditing standards instead of PCAOB rules.
However, there could be indirect consequences for private companies. For instance, if investors are less confident in public markets, there could be spillover effects on the private equity market and business valuations. In addition, private companies considering IPOs may face regulatory ambiguity regarding audit requirements under SEC oversight.
Stay tuned
The draft legislation would likely be part of a larger tax and spending package currently under negotiation in Congress. Its progress depends on intra-party discussions among Republican leaders and whether it qualifies as a budgetary measure. The proposal is expected to face opposition from House Democrats, investor advocates and the auditing profession. Your accountant is monitoring the latest developments on this proposal and can advise you on how to plan for next year’s audit.
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