Republican members of the House Financial Services Committee voted along party lines to advance legislation that would dismantle the Public Company Accounting Oversight Board (PCAOB), and transfer its responsibilities to the SEC.
That came alongside another vote to reduce the funding of the Consumer Finance Protection Bureau (CFPB), which has already received disabling curtailments of its staffing, resources and mission. Currently the CFPB’s budget stands at around $823m transferred from the Federal Reserve; the bill would slash that figure by around 70%.
The proposal would eliminate the PCAOB’s ability to collect its funding from companies and broker-dealers, effectively ending it. Its functions and responsibilities would be folded into the SEC, which currently oversees the nonprofit organization and appoints its personnel.
Critics of the move to eliminate the PCAOB’s independence highlight the SEC’s inability to fully assume the organization’s workload, especially due to the SEC’s change of enforcement and investigatory priorities under the Trump administration.
They warn that the termination of independent PCAOB oversight will lead not only to increased risk of fraud and manipulation, but also of reduced investor confidence and the creation of a less secure investing environment.
Further, the salaries of PCAOB board members folded into the SEC are expected to diminish due to the imposition of government salary caps, which has prompted concern about retaining and attracting talent.
Looking forward
Created in 2002 in the wake of the Enron collapse by the Sarbanes-Oxley Act, the PCAOB is a nonprofit organization that oversees audit companies and creates industry-spanning standards and rules.
The PCAOB has faced longstanding criticism for imposing high compliance costs on regulated entities and for duplicating functions of the SEC, which some view as creating redundant regulatory burdens.
Under the Biden administration the PCAOB ramped up its enforcement activity, eliciting criticism from Republicans, including current SEC chair Paul Atkins.
PCAOB Chair Erica Williams called the move to dismantle the organization “deeply troubling.”
She went on: “With millions of Americans invested in the stock market, including through 401(k)s and pensions, auditors need to perform their audits with more care than ever. Now is not the time for a major disruption in audit oversight.”
