Republican proposal to abolish PCAOB sparks debate
April 28, 2025
The plan is part of a wider reform effort supporting President Trump’s deregulatory agenda.
Republican lawmakers in the US are looking to dismantle the Public Company Accounting Oversight Board (PCAOB), the independent audit regulator established more than two decades ago following the Enron scandal, according to a report by the Financial Times.
The plan forms part of a broader reform package aimed at advancing US President Donald Trump’s deregulatory agenda.
This proposal, outlined by the leadership of the House Committee on Financial Services, is under consideration for inclusion in the tax and spending bill currently before Congress.
The draft legislation would eliminate a levy on listed companies and broker-dealers that currently funds the PCAOB, transferring the organisation’s responsibilities to the Securities and Exchange Commission (SEC).
Created in 2001 in response to Enron’s collapse, which revealed significant flaws in the self-regulatory audit system, the PCAOB oversees audit standards and conducts regular inspections of firms auditing US public companies.
The agency has faced criticism from accounting firms, particularly under the leadership of chair Erica Williams, who has introduced stringent standards and secured record fines through enforcement actions.
The move to abolish the PCAOB is expected to face opposition from Democrats and may not gain full support from audit firms, the publication stated.
The Center for Audit Quality (CAQ), representing major firms, has advocated for the agency to be more responsive to the industry but has not previously endorsed its elimination.
CAQ CEO Julie Bell Lindsay said: “Oversight models may evolve, but what should not change is the profession’s accountability to the capital markets and the need for a system that supports maintaining high standards of audit quality.”
The Financial Times report also noted that PCAOB employees could be offered positions within the SEC, though many would likely face salary reductions, as the PCAOB is not bound by government pay scales.
Critics opine that this could significantly disrupt the audit-firm inspection regime.
However, PCAOB board member Christina Ho, who has opposed several of Williams’s initiatives, suggested that SEC salaries could still be “higher than” several other government agencies.
“The SEC has not had difficulty attracting and retaining talent,” she was quoted by the publication as saying.
The proposed legislation also includes measures to eliminate unallocated funds from a $1bn green retrofitting programme under the Inflation Reduction Act and reduce the budget of the Consumer Financial Protection Bureau.
However, the plan faces procedural challenges.
The House Committee on Financial Services will review the legislation in the coming days, but its inclusion in the reconciliation bill depends on negotiations within the Republican leadership and whether it qualifies as a budgetary measure.
CFA Institute global advocacy head Sandy Peters emphasised the PCAOB’s role in enhancing audit quality. She said: “The largest and most efficient capital markets need a strong, apolitical and independent audit regulator and accounting standard setter. If capital formation is a priority for the administration, this disrupts that.”
[International Accounting Bulletin]
