Get ready for a very different regulatory environment. 

President Donald Trump and his administration have been aggressively overhauling the federal government, with hiring freezes and layoffs, while rolling back rules and regulations at the Public Company Accounting Oversight Board and the Securities and Exchange Commission, as well as threatening to overhaul the Internal Revenue Service and the Treasury Department. 

Only a few days after Trump’s inauguration, the SEC rescinded a Staff Accounting Bulletin on safeguarding cryptocurrency assets, which had been criticized by the crypto industry. The commission later withdrew the PCAOB’s standards on firm and engagement metrics and firm reporting after the American Institute of CPAs and auditing firms urged it to reject the proposed rules. The acting chair of the SEC, Mark Uyeda, also announced that the commission would no longer be litigating its climate-related disclosure rule, which had already been paused after multiple industry lawsuits. 

The SEC in general appears to be taking a more industry-friendly approach than under its previous chairman, Gary Gensler, who stepped down on Inauguration Day. Uyeda is one of the Republican commissioners, but Trump has nominated Paul Atkins, a former commissioner who has been critical of the PCAOB, to fill Gensler’s place. Atkins has been more supportive of the crypto industry than Gensler, while also being critical of the PCAOB and its budget. The Heritage Foundation’s Project 2025 planning document that was circulated prior to Trump’s election called for the PCAOB to be abolished, along with the Financial Industry Regulatory Authority, and said that their regulatory functions should be absorbed into the SEC.

Kenny Holston/Bloomberg

AICPA & CIMA president and CEO Mark Koziel warned a group of accountants about this possibility during a speech at a meeting in New York of the Accountants Club of America.

“There are rumors we’re dealing with currently, and Paul Atkins, in his prior stint with the SEC, was already pretty vocal about the fact that he wouldn’t mind seeing the PCAOB be shut down, and anything that the PCAOB does get rolled up into the SEC,” said Koziel. “So that is something that we are working on today in preparation. People have said, ‘Are you for or against PCAOB?’ For us, whatever they decide to do, we’re going to work with whatever regulator we need to work with as a profession to make sure that we’re serving the public interest the way it needs to be.”

More changes at the audit overseer?

Other observers also see the likelihood of a shakeup of the board members at the PCAOB, as happened during the previous Trump administration and again during the Biden administration.

“I suppose it’s probably pretty likely that there will be maybe a complete change in the membership of the board,” said Dan Goelzer, one of the original members of the PCAOB and later an acting chair. “That happened both of the last times around when there was a change in administration. I don’t really say that with any pleasure. I’d rather see a less political PCAOB. But as a practical matter, I certainly think the new SEC would look to change the chair of the PCAOB — I suppose that’s quite likely at least — and some of the other board members as well.”

There may be a restructuring of the PCAOB as well, along with its possible absorption into the SEC. “The other big picture issue is whether broad efforts to restructure or streamline the government are going to include the idea of folding the PCAOB into the SEC,” said Goelzer. “That came up during the prior Trump administration and was actually proposed in one of Trump’s budgets, and it’s in the Heritage Foundation report. I suspect that will come up as a discussion item, at least. Whether it would actually make it through Congress is far from clear.”

The PCAOB was created under the Sarbanes-Oxley Act of 2002, so it would theoretically take an act of Congress to abolish the board. However, other agencies such as the U.S. Agency for International Development and the Consumer Financial Protection Bureau were also created by Congress, yet the Trump administration and Elon Musk’s Department of Governmental Efficiency have nevertheless moved to dismantle them.

The Center for Audit Quality has been watching the changes at the PCAOB and the SEC closely, and CEO Julie Bell Lindsay noted that the SEC will be dealing with the impact of two Supreme Court decisions last year limiting the use of administrative law judges and court reliance on agency regulations under the longstanding “Chevron deference” doctrine. In the wake of those two decisions in the Jarkesy and Loper Bright cases, several lawsuits have been filed against the PCAOB by plaintiffs seeking a jury trial, including outside the board’s home venue of Washington, D.C. 

It’s not clear if the PCAOB will be as busy with rolling out new standards as it was during the Biden administration, especially after encountering objections from the auditing profession to proposed standards like the one on noncompliance with laws and regulations, or NOCLAR, which has been on hold, as well as the firm and engagement metrics and reporting standards that were recently withdrawn. 

“Over the past couple of years, at the CAQ, we’ve been supportive of the PCAOB modernizing and updating their standards, which have not been updated for 20-plus years,” said Bell Lindsay. “We’ve been supportive of that, but we’re also certainly pointing out areas of concern where we feel that there could be unintended consequences.”

She noted that the CAQ submitted comment letters on nine PCAOB proposed standards and rules, five of which were supportive, and four of which were not. “Generally, when we’ve expressed concerns or have not been supportive of a particular standard from the PCAOB, it really comes down to three different areas of concern,” said Bell Lindsay. “One is the lack of data-driven analysis, where what is the problem trying to be solved is something that we’re focused on. To the extent we can, we have tried to provide data and research to the board to inform the standard-setting process. The second area is lack of cost-benefit analysis. For example, on the NOCLAR proposal, there was not even a cost estimate included in that proposal by the PCAOB. We and other stakeholders in the ecosystem attempted to put together a cost analysis of the proposed standard, but needing to fully understand that is very important.”

The PCAOB and the SEC will probably be expected to provide more rigorous cost-benefits analysis for any new standards, rules and regulations. One of the PCAOB board members, Christina Ho, has called for the board to do a more rigorous economic analysis of the standards before finalizing them, and to not rush to do them by the end of the year.

Bell Lindsay would like to see the PCAOB create more outside advisory groups apart from its Investor Advisory Group and Standards and Emerging Issues Advisory Groups so it can consult with a greater variety of outside stakeholders. 

As for the SEC, she is hopeful about Atkins becoming chair since she used to work with him while they were both at the SEC. “I had the privilege of serving at the commission when Paul was a commissioner,” said Bell Lindsay. “I was there from 2002 to 2005, so I do know him fairly well. He was there during the standing up of the PCAOB in the mid-2000s. Officially, we’re not sure where Paul is going to stand on things. What I have found is that Paul is very reasonable, and I do believe he appreciates the key role that the public company audit profession serves in the capital markets and the need for effective, transparent oversight of the audit profession.”

Enforcement and inspections

Goelzer anticipates less emphasis on enforcement now at the PCAOB. “One change I would expect is that, at least to my perception, these enforcement programs have become more focused on violations that don’t directly relate to the auditing process or failures in the auditing process — things like filing Form AP on time or not including some participating firm in the Form AP, that type of thing —  and then fairly substantial monitoring penalties for those violations,” he said. “I would expect that to change. Enforcement programs might go back more to focusing on what I would call substantive audit failures.”

The SEC and the PCAOB may end up backing away from the stepped-up enforcement seen in recent years under Gensler and PCAOB chair Erica Williams. There may even be a complete overhaul of the membership of the board, as occurred under both the Biden administration and the previous Trump administration.

“The current board’s priorities were to use enforcement as a regulatory tool, more standards and more enforcement,” said Jackson Johnson, president of Johnson Global Advisory, a Washington, D.C.-based firm that helps auditing firms navigate the PCAOB inspection process. “The next board will be quite different. The next board will have a more collaborative mindset with firms, more information-gathering with stakeholders, more economic analysis to inform standard-setting, more robust economic analysis to inform standard-setting.”

He acknowledged that the PCAOB had accomplished a great deal under Williams, including the QC 1000 quality control standard, which will be a major overhaul for some firms. However, he also pointed to Christina Ho’s complaint about “midnight rulemaking” as the board rushed to finalize standards before the end of 2024.

“For me, what I want for firms will be a period of recalibration and digesting what has been thrown on them over the last couple years through all of these new standards,” said Johnson. 

He anticipates a slowdown in rulemaking at the board. “I’m not sure how much of a flurry of new enforcement cases will be brought,” he said. “I think right now, we are going to be for some time in this transitional stage. As soon as some of these board members at the PCAOB depart voluntarily or involuntarily, there will be a lack of a quorum at the board, so there will be a temporary stoppage of action, and that will affect everything from inspection reports to opening investigations. All of those things need a majority board to approve. The last time we did an administrative change, there was a holdup of inspection reports for a while, and it took some time before the PCAOB had a full board back in place. While I’m working on enforcement cases right now, I think when the board starts to shuffle, there might be a period of time where we see a slowdown in new investigations, but frankly, other things too, like new proposed standards and new inspection reports getting issued, because all of these things require a board vote.”

The PCAOB could be returning to its roots in some ways in the new administration. “I think what you’ll see is kind of a return to the core mission,” said Steven Richards, a senior managing director at Ankura in Washington, D.C., who was a previous advisor to the PCAOB and an assistant chief accountant at the SEC. “They’ve been very aggressive in upstaffing. Their budget has gone up, so I think what you’ll see is the commission, through the chair, put some constraints on that kind of stuff, and actually I think you’ll see the budget shrink. I think it will be a return to their core mission around investor protection through high-quality audits. I think you’ll see them focus very much on the inspection program. They’ve had an increase in both fines and case counts, but the majority of the case count increases have been really more compliance-oriented things being turned into enforcement matters that used to go through other processes of the board, like remediation and the inspection division. I don’t think you’ll see that anymore. I think those kinds of cases will go away and go to a different mechanism.”

He believes monetary penalties will go down as well. “You’ll see something around the civil monetary penalties having a better relationship to the conduct,” said Richards. “Before this last administration, penalties were too low, but they swung too far and now they got completely out of hand relative to the type of conduct. I think what you’ll see is a revision more toward the norm and a refocusing on the core mission. The inspection division drives a lot of good audit improvement. I think you’ll see that division continue to function more or less like it has the past, but with much more focus on core audit, the performance of the audit, and probably a little less around some of these other compliance things that don’t have as direct an intersection with poor performance of the audit or the quality control system around it. Generally speaking, the commission is going to control the board through its budget. … I don’t think it’s unlikely that they’re going to have to replace some members of the commission to do that. I think those are most likely: a smaller, leaner, more focused-on-core-mission PCAOB and probably some turnover at the board.”

He doesn’t expect to see the PCAOB folded into the SEC, as was proposed in a bill in 2022 by Rep. Bill Huizenga, R-Michigan. 

“I wouldn’t expect that to be at the top of their agenda,” said Richards. “I think more likely what you’re going to see, just because it doesn’t require an active Congress, is control of the direction and priorities of the PCAOB and the SEC through the appropriations and budget process. Both are going to be under pressure, and they’re likely to make some changes at the board level, and that will also bleed out to the organization.”

During a recent AICPA conference, Rep. French Hill, R-Arkansas, and Mark Uyeda, who is now acting chair after the departure of Gary Gensler, shed light on what regulatory reform could look like under the new administration, including integrating the PCAOB into the SEC as a way to reduce redundancy, lower costs and streamline oversight.

“The administration’s direction is further underscored by the appointment of Paul Atkins, known for his skepticism of the PCAOB, to SEC chair,” said Jennifer Wood, assurance service line leader at Top 100 Firm The Bonadio Group. “These events reflect a broader shift toward capital formation and reduced compliance burdens. Reduced compliance costs and increased efficiency sound appealing, but there’s also a risk of losing the rigorous oversight that underpins accurate financial reporting and protects the public interest. If managed thoughtfully, a revamped PCAOB could streamline processes and refocus on high-impact areas. However, audit quality, transparency and investor protection are non-negotiables for a thriving financial system, and they must remain front and center as we navigate this transition.”