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The Consumer Financial Protection Bureau, the Internal Revenue Service and the Department of Education have all been caught in the crosshairs of the Trump administration and Elon Musk’s Department of Government Efficiency. Now, accountants predict that the Public Company Accounting Oversight Board could be next.
Trump’s nomination of Paul Atkins to replace former SEC Chair Gary Gensler has been seen by many to be a sign of deregulation on the horizon, with further estimates that Atkins will reshape the PCAOB’s leadership makeup if confirmed to the SEC. Other possible scenarios include the consolidation of the PCAOB into the SEC.
Lara Long, managing director at the New York-based business advisory firm Riveron, said players in the capital markets see Republican control of the White House and Congress as a strong sign that regulatory actions will “either be reversed or will significantly decline.”
“So far, no one is 100% sure of the PCAOB’s future, including whether the agency will be folded into the SEC,” Long said. “Many insiders feel that whatever happens with the PCAOB will not eliminate the need for the financial markets to have an audit regulator.”
Data published by Cornerstone Research in February recapped the PCAOB’s enforcement action trends over the last 20 years. In the decade that followed the first finalized enforcement action from the board in 2004, activity was calm, with 72 auditing actions against a mix of 126 respondents that included 53 audit firms and 73 individuals. Monetary penalties were roughly $5 million.
That trend took a dramatic shift in 2015, when the PCAOB finalized 34 auditing actions and submitted close to $10 million in penalties — double the total for the prior 10 years.
Between 2015 and 2024, the board finalized a total 302 auditing actions against 466 respondents and issued monetary penalties in excess of $86 million. Last year accounted for roughly 40% of the penalties issued for the decade.
“The PCAOB continued aggressive enforcement in 2024, finalizing 30 auditing actions in the first half of 2024, more than triple the number of actions finalized in the first half of 2023,” Jean-Philippe Poissant, one of the report’s co-authors and co-head of Cornerstone Research’s accounting practice, said in a statement. “In one in five auditing actions, the PCAOB alleged violations of not only auditing standards, but quality control standards and ethics and independence, as well.”
Similar data released in a March report by the Brattle Group offered predictions into how this trend could change under the new Trump administration.
“We expect that the combination of Trump 2.0 and ongoing constitutional challenges [like] Jarkesy and Doe vs. PCAOB matters will bring a sea change in auditor enforcement activity,” the report said.
Learn more about the recent activity from the PCAOB and what experts across the profession think the future will hold for the organization.
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PCAOB sanctions nine firms in KPMG’s network
Officials with the PCAOB censured and fined nine firms in KPMG’s global network of firms for both violating quality control standards and neglecting to shed light on who performed the audits.
“It is essential that investors and audit committees know where issuers’ audits are being conducted and by whom so that they can make informed selection and ratification decisions,” Erica Williams, PCAOB chair, said in a statement this month. “These violations prevent investors and audit committees from obtaining important information.”
Is it the end of the PCAOB and SEC’s crackdown on auditors?
The first half of 2024 was rife with enforcement actions from the PCAOB and Securities and Exchange Commission, but that trend was quelled in the second half of the year due to a notable Supreme Court ruling and a rash of lawsuits against the PCAOB.
Data from the Brattle Group showed that both organizations brought 58 enforcement actions against auditors last year, keeping pace with the 60 actions the previous year and the 59 actions in 2022. But experts predict that leadership changes at the PCAOB and SEC, coupled with a second Trump administration, could drastically hamper this trend.
“Activity appears to have been substantially impacted by the Supreme Court’s SEC vs. Jarkesy ruling, which found that the regulator’s use of administrative proceedings to seek financial civil penalties for securities fraud was unconstitutional,” Alison Forman, co-leader of Brattle’s Accounting Practice, said in a statement. “We expect fallout from Jarkesy and similar constitutional challenges facing the PCAOB — as well as the new presidential administration — to dramatically shift the enforcement landscape moving forward.”
Auditor outcry sees rollback of PCOAB firm and engagement metrics
Following widespread outcry from auditing firms and companies, the PCAOB has walked back two proposed standards on firm reporting and firm and engagement metrics it approved last November.
Both standards failed to obtain the required additional approval from the SEC in order to take effect. Under the new guidance, firms would have been required to provide the PCAOB with details on their partner and manager involvement in audits, workload, training hours, experience of audit personnel, retention, allocation of audit hours, restatement history, fees, governance, network relationships, cybersecurity and more.
“Among our concerns was the potential unintended consequence of the rules prompting small and midsized audit firms to stop performing public company audits, impacting companies that depend on those audit firms as they seek access to U.S. capital markets,” Sue Coffey, the AICPA’s CEO of public accounting, said in a statement, according to the Journal of Accountancy.
Could the Trump administration dissolve the PCAOB?
Industry experts eyeing the governmental downsizing led by Elon Musk’s Department of Government Efficiency are beginning to prepare for a similar scenario at the PCAOB.
In speaking at a February meeting of the Accountants Club of America in New York, AICPA and CIMA president and CEO Mark Koziel remarked that the lack of general public awareness of the PCAOB leaves the organization with a smaller pool of advocates working to keep it alive when compared to other organizations.
“When you think about the fact that the PCAOB, if they were to shut it down, and DOGE would be able to take credit for it, who would oppose it?” Koziel said. “It has a $400 million budget, none of which is paid for by taxpayers. … But it’s a $400 million win, if [Elon Musk’s DOGE] could say it publicly in some way, shape or form.”
Diving into the PCAOB’s record $35M in fines in 2024
Last year was an active enforcement year for the PCAOB, as officials levied more than $35 million in fines.
The largest of the bunch was a $25 million fine against KPMG Netherlands, after the PCAOB found via a 2022 whistleblower report that employees were cheating on the firm’s internal training program by sharing answers with one another over a five year period. This was the largest civil money penalty in the PCAOB’s history.
Washington Governor Bob Ferguson said he wouldn’t sign a budget that relies on the wealth tax proposed by his fellow Democrats in the state legislature.
House and Senate budget proposals “both rely on a wealth tax which is novel, untested and difficult to implement,” Ferguson told reporters in Olympia Tuesday. “They need to immediately move budget discussions in a different direction.”
Ferguson said the state is facing a $16 billion budget deficit over the next four years, which will be exacerbated by cuts in federal funding by the Trump administration. Democrats in the Washington State Senate proposed a 1% tax on the stocks, bonds, exchange-traded funds and mutual funds held by people with more than $50 million of those assets. House Democrats are considering a similar measure.
That would make Washington the first state in the U.S. to tax its residents’ wealth. The bill’s sponsors say that including only publicly traded assets would address some of the concerns that the state’s Department of Revenue raised in a November report regarding the difficulty of calculating and collecting such a tax. Washington doesn’t have an income tax.
Ferguson did leave open the possibility of a small wealth tax that raises no more than $100 million, just to test the legality of the proposal.
“We cannot rely on a revenue source with a real possibility of being overturned by the courts,” Ferguson said.
Some wealthy people have already left Washington since the state passed a 7% tax on capital gains, which was first collected in 2023. Tax attorneys and wealth managers say that even the discussion of a new tax on financial holdings is already encouraging more people to leave the state.
Speaking in a state Senate hearing on Monday, Rian Watt, executive director of Washington progressive advocacy group Economic Opportunity Institute, said the possibility of capital flight is “worthy of consideration, but in our view it is not worthy of concern.”
Private sector employment grew by 155,000 jobs in March as annual pay increased an average of 4.6% year to year, payroll provider ADP reported Wednesday.
Service-providing businesses added 132,000 of those jobs, including 57,000 in the professional and business services sector, which includes accounting and tax preparation. Financial activities, which includes banking, added 38,000 jobs in March. The goods-producing sector added 24,000 jobs, including 21,000 in manufacturing. However, construction hiring slowed, and the natural resources and trade, transportation and utilities sectors lost jobs.
Small businesses gained 52,000 jobs, including 42,000 in businesses with between one and 19 employees, and 10,000 at companies with between 20 and 49 employees. Medium-size establishments added 43,000 jobs, including 34,000 at businesses with between 50 and 249 employees, and 9,000 at organizations with between 250 and 499 employees. Large companies with 500 or more employees gained 59,000 employees in March.
Year-over-year pay gains slowed to 4.6% for employees who stayed in their jobs and to 6.5% for those who changed jobs. For professional and business services, the average yearly pay gain was 4.4% for job stayers. The pay premium for job-changers was 1.9 percentage points, matching a series low last seen in September.
“What that means is that there’s less and less incentive for workers to quit their jobs and start new ones,” said ADP chief economist Nela Richardson during a conference call Wednesday with reporters. “That pay premium shrinking to less than 2% means that the gains from switching have narrowed as well. We expect it quickly to either stabilize or even trend down over the next month or so.”
A landmark research study by the Governmental Accounting Standards Board has provided one of the most detailed examinations to date of how state and local governments in the United States use GAAP.
The study confirms that all 50 U.S. states utilize GAAP in their financial reporting, a testament to the foundational role these standards play in ensuring transparency, consistency and comparability. However, GAAP adoption among local governments is more fragmented. Among the 2,209 audited local governments examined, 74% of counties and 71% of municipalities were found to follow GAAP, with audited special districts showing an even higher utilization rate of 89%. These findings, while robust, apply only to governments that issue audited financial statements. When the researchers extrapolated to a broader sample — accounting for governments without accessible reports — estimated GAAP usage ranged from 77% to 79% for counties and 67% to 74% for municipalities, depending on the assumptions applied.
One of the key contributions of the study is its categorization of state-level financial reporting requirements. Each state has the authority to determine whether and how GAAP is mandated. The researchers placed states into five categories: those that require GAAP with no exceptions; those that require it with exceptions; those that prescribe a non-GAAP framework with or without exceptions; and those that do not specify a framework at all. While GAAP is universally required at the state level, the requirements for counties, municipalities and special districts are far more variable. The lack of a uniform mandate at the local level has created a fragmented reporting environment, especially for smaller jurisdictions.
To better understand why some governments adopt GAAP even when it’s not required, the study analyzed a sample of 1,372 counties, municipalities and special districts in seven states that offer flexibility in choosing their reporting framework. Several statistically significant factors were found to influence GAAP adoption. Larger governments, measured by total revenue, are more likely to utilize GAAP. The same is true for governments carrying higher levels of outstanding debt, particularly those that issue public debt requiring continuing disclosures to the Municipal Securities Rulemaking Board. Additionally, governments subject to a federal Single Audit — triggered by the receipt of $750,000 or more in federal funding — were more inclined to adopt GAAP, likely because of the audit standards and federal oversight such funding entails.
The most striking finding of the study was the impact of state-supported alternative financial reporting frameworks. In states like Indiana, Kansas and Washington, which offer comprehensive non-GAAP frameworks complete with manuals, templates and technical support, governments were up to 12 times less likely to use GAAP. Among governments subject to a Single Audit, those without a state-supported alternative were 36 times more likely to follow GAAP. This dramatic disparity illustrates the powerful role that institutional support — and not just regulation — can play in shaping accounting practices.
The researchers also contextualize these patterns using institutional theory, which posits that governments adopt certain practices not merely for technical reasons, but to signal legitimacy to stakeholders. Engagement in professional associations and the need to demonstrate transparency to voters, creditors and oversight agencies all serve as pressures toward GAAP adoption. In some cases, political scrutiny or financial mismanagement has led to legislative reforms mandating GAAP compliance, underscoring the symbolic as well as practical importance of standardized reporting.
These findings are especially relevant as governments prepare for the implementation of the Financial Data Transparency Act, passed in 2022. The FDTA requires municipal securities issuers to submit their financial disclosures in machine-readable, standardized formats using open data standards. Although the act does not mandate GAAP, it requires structured financial reporting that may more easily align with GAAP-based formats.
For governments already reporting under GAAP, this transition to digital reporting is expected to be seamless. Their financial statements follow a consistent structure that can be more readily mapped to the taxonomies being developed for FDTA compliance. On the other hand, governments using non-GAAP frameworks may face significant challenges. These governments will need to map their existing reports to new standardized formats, which could require updated accounting systems, training for staff or outside technical assistance. The availability of well-supported alternative frameworks — an asset in the past — may now become a hurdle to compliance if those frameworks do not translate cleanly into the new data requirements.
As a result, FDTA could become a catalyst for broader GAAP adoption. Governments may conclude that aligning their reporting with GAAP will make FDTA compliance easier and reduce the cost and complexity of converting financial data into the required digital formats. Midsized governments and those on the margins of GAAP adoption may be especially susceptible to this shift. At the same time, the pressure to comply with FDTA may expose the limitations of existing alternative frameworks, potentially prompting states to revisit their support structures or consider standardization strategies that better align with federal expectations.
GASB’s working paper serves as a valuable foundation for monitoring how these dynamics play out. It not only provides updated estimates of GAAP usage but also introduces a replicable model for assessing changes over time. This is particularly critical in the coming years, as the federal push for data transparency, technological modernization and fiscal accountability converges with longstanding debates over accounting standards in the public sector.
In summary, the GASB study reveals a nuanced picture of financial reporting across U.S. governments, shaped by institutional pressures, state mandates, organizational capacity and market incentives. As the FDTA begins to take effect, it is poised to influence these patterns — potentially accelerating the shift toward GAAP or, alternatively, driving efforts to modernize and standardize non-GAAP reporting systems. Either path will require careful coordination among governments, regulators and professional organizations to ensure the goal of the FDTA — clear, comparable, and accessible financial information — is achieved.