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Republican legislators plan to dismantle the US audit regulator established over twenty years ago in response to the Enron scandal as part of a reform initiative aimed at advancing Donald Trump’s deregulatory policies.
The proposal to abolish the independent Public Company Accounting Oversight Board (PCAOB) was shared last Friday by the leadership of the House Committee on Financial Services, intended for inclusion in a significant tax and spending package currently being debated in Congress.
The draft bill suggests eliminating a fee imposed on publicly listed firms and broker-dealers that finances the PCAOB, with its responsibilities being transferred to the Securities and Exchange Commission (SEC).
The PCAOB was created to regulate audit standards and perform regular checks on firms auditing US public companies, following the Enron collapse in 2001 that revealed flaws in the previous self-regulating system.
Accounting firms have expressed discontent with the assertive leadership of chair Erica Williams, under whose direction the agency implemented stringent new standards and levied record fines for enforcement actions.
Any attempt to abolish the agency is expected to face pushback from Democrats and might not receive full support from auditing companies.
The Center for Audit Quality, representing the largest firms, has called for the agency to be more accommodating to accounting firms but has refrained from advocating for its elimination.
While PCAOB staff would have the opportunity to move to the SEC, they might have to accept lower salaries since the agency isn’t bound by government pay standards. Critics argue that this change could seriously disrupt the audit-firm inspection process.
The proposal also encounters procedural challenges. It will be presented to the entire House Committee on Financial Services for review in the upcoming days. However, its inclusion in the overarching tax and spending bill, known as a reconciliation bill, will depend on negotiations among Republican leaders in both the House and Senate and whether it qualifies as a budgetary item.
