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The US audit oversight board, established following the Enron scandal, has been given a stay of execution after the Senate parliamentarian determined that the Republicans’ proposal to eliminate the agency as part of their extensive tax and spending legislation would breach Senate rules.
The GOP intended to dismantle the Public Company Accounting Oversight Board, transferring its auditing and penalty authority to the Securities and Exchange Commission. They claimed this change would reduce costs for taxpayers and the public companies that fund the board through fees.
However, the Senate parliamentarian, who provides guidance on the upper chamber’s rules, stated that this proposal failed to meet the necessary criteria for inclusion in the legislation, which stipulates that only budget-related matters can be addressed.
Additionally, the parliamentarian dismissed attempts to defund the Consumer Financial Protection Bureau, reduce Federal Reserve officials’ salaries, and cut spending from the Treasury’s financial research office.
Tim Scott, chair of the Senate banking committee, which had pushed the proposed changes, expressed his commitment to collaborating with the parliamentarian and advancing laws aimed at reducing unnecessary spending and duplication in federal programs.
The PCAOB oversees audits of US-listed companies and international firms auditing these entities. It has contended that the SEC lacks the budget and expertise necessary to undertake these responsibilities. The PCAOB also asserted that its elimination would not result in taxpayer savings since it operates on fees collected from public firms.
Under the leadership of Erica Williams, the PCAOB has imposed record fines on auditing firms, while also facing criticism for allegedly concentrating too much on minor violations. It has been accused of ignoring the perspectives of audit firms when establishing stringent new standards.
Williams expressed her satisfaction regarding the ruling on Friday, stating, “This is encouraging news for millions of Americans whose retirement funds and investments would be jeopardized by the elimination of the PCAOB.”
Nonetheless, Republicans may propose new legislation aimed at abolishing or modifying the agency in the future. The House financial services committee is set to hold a hearing next week titled “Reassessing Sarbanes-Oxley: the compliance costs in today’s capital markets,” referring to the 2002 law that established the PCAOB.
Paul Atkins, the new SEC chair from the Trump administration, has been a long-time critic of the PCAOB and holds the authority to remove board members, including Williams, as well as approving the agency’s regulations.
Republican efforts to undermine the CFPB are likely to persist despite the parliamentarian’s decision, according to Chuck Bell, advocacy program director at Consumer Reports, the US consumer advocacy group.
“The administration has effectively silenced this vital consumer protection agency by halting much of its operations, discontinuing several enforcement actions, and altering its focus,” he stated.
The CFPB did not provide a prompt response to a request for comment. The proposed spending bill would have significantly weakened the agency responsible for overseeing consumer finance products and retail banking by cutting off its funding from the Federal Reserve’s budget.
The initiative to eliminate the Office of Financial Research by completely cutting its budget received backlash from academics and former officials, including two past Federal Reserve chairs, Ben Bernanke and Janet Yellen. They argued that the office, established in 2010, plays a crucial role in researching potential financial crises.
Additionally, it contributes essential data for the Secured Overnight Financing Rate (SOFR), a major benchmark interest rate that influences trillions in financial transactions. Academics warned this could lead to a significant decline in SOFR’s integrity if the OFR were to be abolished, as stated in a public letter earlier this week.
