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Republican lawmakers plan to shut down the US audit regulator, which was founded in the wake of the Enron scandal more than 20 years ago, as part of a reform package designed to provide Donald Trump’s deregulation agenda.
The proposal to remove the Accounting Oversight Committee for independent public companies was announced Friday by House Committee leaders on Financial Services.
Under billtaxation on listed companies and broker-dealers funding PCAOB will be discarded, and the organization’s liability will be folded to the Securities and Exchange Commission.
PCAOB was established to oversee audit standards and conduct regular inspections for companies auditing public companies in the US after the collapse of Enron in 2001, and exposed their shortcomings in the previous self-regulation system.
The accounting firm opposes activist leaders of Chairman Erica Williams, under which the agency has imposed strict new standards and extracted record fines for enforcement actions.
Efforts to eliminate institutions are likely to address resistance from Democrats and may not receive full approval from the auditing company.
Audit Quality Centres, representing the largest companies, require agents to be more sensitive to accounting companies, but previously stopped asking for that elimination.
“While surveillance models may evolve, what should not be changed is the need for a system that supports professional accountability for the capital market and the maintenance of high standards of audit quality.”
While PCAOB employees may be given the opportunity to transfer roles to the SEC, organizations are not eligible for government pay scale and often need to take pay cuts.
Critics argue that such a move would significantly disrupt the audit inspection system.
However, Christina Ho, a board member of PCAOB who opposed some of Williams’ signature initiatives, said SEC salaries could be higher than those of many government agencies. “The SEC has never had any difficulties attracting and retaining talent,” she said.
The committee’s bill will also scrap unallocated funds and cut the Consumer Financial Protection Agency’s budget under Joe Biden’s groundbreaking climate law, a $1 billion green modification program brought under the Inflation Reduction Act.
However, it faces procedural hurdles. The full committee on financial services will consider the law for the next few days, but whether it will be included in the tax and spending bill, known as the settlement bill, will depend on negotiations among Republican leaders in the House and Senate.
Sandy Peters, Global Advocacy Director at CFA Institute, a specialized investor organization, said the creation of PCAOB has dramatically improved the quality of the audit.
“The largest and most efficient capital markets require strong, non-political, independent audit regulators and accounting standard setters,” she said. “If capital formation is a priority for the administration, this disrupts it.”
