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The regulatory forecast under Trump: Less, and lighter

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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Only a few days after Trump’s inauguration, the SEC rescinded a Staff Accounting Bulletin on safeguarding cryptocurrency assets, which had been criticized by the crypto industry.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.

Donald Trump speaking at his 2025 inauguration
Donald Trump speaking at his 2025 inauguration

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.”

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IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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