Proposal To Defund and Transfer Public Company Accounting Oversight Board (PCAOB) To SEC

Inside the PCAOB: Structure, Standards, and Oversight
On April 25, 2025, the House Financial Services Committee released draft language for defunding the PCAOB and transferring the activities to the SEC. The PCAOB is a nonprofit entity created with the passage of the Sarbanes-Oxley Act of 2002. Congress established them with the intention of protecting investors and the public interest by promoting accurate and independent audit reports. They also oversee public company audits; this was done to help recover confidence in public company accounting after the Enron scandal.

Inside the PCAOB: Structure, Standards, and Oversight
The PCAOB is comprised of five members appointed by the SEC. The board develops standards and rules, each requiring SEC approval, that are informed by input from two key advisory groups: the Investor Advisory Group, focused on investor interests, and the Standing Advisory Group, which advises on audit practices. Like the SEC, the PCAOB emerged in response to a financial crisis and operates as an independent watchdog. With a clear mission to enhance trust in financial reporting, the PCAOB has already issued 55 dockets—many of which have been formally adopted by the SEC—advancing transparency, accountability, and investor protection across the board.

What’s at Stake: Transparency, Accountability, and Investor Confidence
According to AICPA CEO Mark Koziel, CPA, and CGMA, “The AICPA believes that healthy oversight of accounting firms that audit listed companies strengthens capital markets and protects the public interest.” The PCAOB plays a vital role in that oversight, impacting both domestic and international companies. One of the clearest demonstrations of its value to the public is found in its Firm Inspection Reports. Each year, the PCAOB inspects hundreds of public company audits, highlighting deficiencies and providing detailed explanations that benefit both auditors and investors. For example, the 2024 Inspection Report of KPMG LLP, released February 26, 2025, offers transparent insights into audit quality and areas for improvement. As the PCAOB faces potential funding cuts, a pressing concern is whether it can continue delivering this level of oversight and maintain the consistency and quality that the capital markets rely on.

PCAOB Response: What’s at Risk if Oversight Is Disrupted
In remarks delivered at the Investor Advisory Group Meeting on April 29, 2025, PCAOB Chair Erica Y. Williams expressed deep concern over the draft legislation to defund the PCAOB. She warned that the disruption could delay inspections for years, jeopardizing investor protection and market stability. “It takes a minimum of 480 experienced staff to conduct the inspections required by the Sarbanes-Oxley Act,” Williams noted, “in addition to many others essential to supporting their work—and hiring them would come at considerable cost to the SEC, assuming it’s even possible to hire them at all.”

Williams emphasized not just the volume of talent required but the depth of expertise that could be lost in the transition. “They have experience in more than 30 industries—from banking to energy—and expertise across 40 subject areas, including revenue recognition, derivatives, and technology. They speak 33 different languages.” Her message was clear: the knowledge and skills embedded in the PCAOB workforce are not easily replaced and losing them—temporarily or permanently—could come at a significant cost.