In early May, the House Financial Services Committee advanced legislation—by a 30–22 party-line vote—that would eliminate the Public Company Accounting Oversight Board (PCAOB) and consolidate its functions under the Securities and Exchange Commission (SEC). The proposal still requires formal bill language and a cost-estimate score from the Congressional Budget Office before moving forward.
The PCAOB: A Post-Enron Pillar of Investor Protection
Created in 2002 under the Sarbanes-Oxley Act, the PCAOB was Congress’s response to corporate implosions at Enron, WorldCom, and Tyco. Its mandate: to oversee public company audits and promote investor confidence through accurate, independent audit reporting. Although the SEC maintains oversight authority, the PCAOB functions as an independent nonprofit and incorporates investor input through advisory groups. It is funded entirely by fees on audit firms and the companies they audit—not by taxpayers.
Reform, Not Redundancy
We’ve previously highlighted criticisms that the PCAOB had become “a toothless regulator,”[1] especially during the pandemic when enforcement actions fell sharply. At the time, Board officials claimed that fewer cases reflected preventive success rather than lax oversight. Since then, however, enforcement has increased, signaling renewed regulatory vigor.
Despite this, proponents of the current proposal argue that eliminating the PCAOB would reduce costs, streamline oversight, and consolidate authority within the SEC. While a similar measure failed five years ago, the current push is part of a broader deregulatory agenda. Supporters also claim that the PCAOB imposes unnecessary layers of compliance burden and cost for businesses.
Critics: Wrong Move, Wrong Time
Investor advocates and former regulators have strongly opposed the proposal. Amanda Fisher, policy director and COO of Better Markets, called it “dangerous and misguided.” Critics argue it would:
- Weaken audit oversight, particularly of large accounting firms.
- Disrupt international progress, including recent PCAOB agreements with Chinese regulators.
- Fail to save money, and likely increase costs.
In fact, the SEC lacks the personnel and infrastructure to assume audit oversight without rehiring much of the PCAOB’s current staff—potentially at greater expense. The PCAOB’s exemption from federal pay caps also makes retention and transition more complicated.
Importantly, the claim that this move would save taxpayer dollars is inaccurate. The PCAOB is not funded by taxpayers; it is funded by fees from audit firms and the public companies they serve. Moving its functions into the SEC would trigger costly operational disruption and duplicate staffing, as the SEC lacks the audit expertise the PCAOB has developed. The two bodies are not redundant—they perform complementary roles.
Investor Confidence at Risk
At a time of heightened economic volatility and persistent fraud risks, dismantling a core pillar of audit oversight sends the wrong signal to markets. As PCAOB Chair Erica Williams recently noted:
“History tells us that when the economy is tight, the risk of fraud goes up… Now is not the time for a major disruption in audit oversight.”
Independent auditors play a critical role in ensuring accurate financial disclosures. And robust oversight of those auditors is essential to protecting public markets and investor capital. Weakening that structure now would not only be costly—it would be reckless
[1] Watching The Detectives: A Call For More Investor Input At The PCAOB | Berman Tabacco