Political Uncertainty Looms Over PCAOB as SEC Leadership Shifts, announces the headline of a recent article on the website of the New York State Society of CPAs.

Here are some extracts:

• The PCAOB, created by Congress through the Sarbanes-Oxley Act of 2002, was established to oversee the auditing of public companies following major accounting scandals. This would mean that its significant overhaul would need an act of Congress or a court ruling. 
• Additionally, the SEC directly appoints and can remove PCAOB board members, making it more susceptible to political shifts….
• The recent appointment of Paul Atkins as SEC chair under the Trump administration is expected to bring significant changes to the PCAOB, with speculation that its regulatory role could even be merged into the SEC. The previous two presidential administrations already overhauled the PCAOB’s leadership, and the trend is expected to continue.
• Under Chair Erica Williams, the PCAOB pursued a stricter regulatory agenda, including a proposed rule on fraud detection that auditors strongly opposed. With the new administration, the PCAOB’s direction could shift toward deregulation, aligning more with industry concerns, the Journal said.

And then, as subsequently reported by the Financial Times:

• The proposal to eliminate the independent Public Company Accounting Oversight Board was published late on Friday by the leadership of the House Committee on Financial Services, for inclusion in the giant tax and spending bill being considered by Congress.
• Under the draft legislation, a levy on listed companies and broker-dealers that funds the PCAOB would be scrapped and the organization’s responsibilities would be folded into the Securities and Exchange Commission…
• Any effort to eliminate the agency is likely to meet resistance from Democrats and may not receive the full endorsement of audit firms.
• The Center for Audit Quality, which represents the largest firms, has called for the agency to be more responsive to accounting firms, but has previously stopped short of calling for its elimination.

Canadian Accountant weighed in:

• While some Canadian firms, especially those targeted by the watchdog, might cheer the disappearance of the PCAOB, most serious professionals recognize the dangers of an unregulated profession, and the positive influence that the PCAOB has had on our own audit regulator, the Canadian Public Accountability Board. 
• The news was barely reported in Canada and the United States — which is typical of news released late on Fridays — but Bob Rae of all people posted his reaction on Twitter/X. “This is how centralized authoritarianism works,” posted Rae. “Fire the auditors, arrest the judges, intimidate the universities, silence the lawyers. It is a universal, historic pattern. We cannot turn away from this.” 

As we’ve seen most recently in the area of climate-related disclosure, “competitive” considerations often or usually dictate that a regulatory withdrawal in the US is followed by something comparable in Canada. That would certainly be a swerve in this case though, given that CPAB in some key respects has been ramping up:

• The Canadian Public Accountability Board (CPAB), Canada’s public company audit regulator, is pleased to announce that rule and legislative amendments required to increase the disclosure of our regulatory assessment results have been secured.
• These amendments make mandatory the reporting of file-specific inspection results to audit committees and allow CPAB to publish individual firm inspection reports.
• “This is a significant milestone for CPAB, and I sincerely appreciate the support of our stakeholders, the relevant provincial government and securities regulators, and the CPAB team,” said Carol Paradine, Chief Executive Officer, CPAB. “These approvals are a final step in our initiative to enhance the information we disclose and will allow us to provide greater transparency for the investing public, audit committee chairs and other stakeholders across Canada.”

The reporting of firm-specific public inspection reports is effective commencing with 2025 inspections, with CPAB reporting that the first such reports are expected to be published in the first quarter of 2026. Well, it may all be for the best, but as I’ve written here several times in the past, the audit profession’s recruitment-related challenges aren’t going to be helped by making the discipline even more onerous and compliance-oriented (and, correspondingly, simply less fun). It’s hard to project how that will play if it’s accompanied by any degree of backsliding in the US (although direct oversight by the SEC doesn’t exactly amount to being unregulated, not yet anyway). As with most of what the Trump administration does, its moves in this area seem driven more by engrained institutional distrust and destruction-mindedness than by any semi-coherent theory of how the financial reporting ecosystem might benefit. But it’s not self-evident to me that the CPAB’s move toward “naming names,” even as it satisfies basic curiosity and provides fodder for commentary and discussion, will really move the complex goal of sustainably risk-appropriate investing and wealth creation in a better direction either…

The opinions expressed are solely those of the author.