Since its inception, the PCAOB has been the proverbial political football of the securities laws. Created in the aftermath of the Enron debacle when Congress decided that self-regulation was no longer advisable for the public accounting industry, the PCAOB has spent the last 23 years standing up a formidable regulator of the audit profession, adopting standards, conducting inspections and enforcing the standards that it has created. The Board has survived a devastating scandal involving the appointment of its first Chairman, a challenge to the constitutionality of its authorizing statute and numerous changes in leadership when the political winds in Washington shifted over the course of the past two decades. For more on the history of the PCAOB, check out this gallery in the SEC Historical Society’s virtual museum and archive.

This year, the PCAOB’s challenges have been more existential. Targeted for elimination by Project 2025, the PCAOB found itself at risk of being eliminated, with the SEC to take over its responsibilities. As I mentioned last month, the legislative effort to eliminate the PCAOB ran aground due to a ruling by the Senate parliamentarian, who deemed the Republican PCAOB elimination proposal to be subject to the “Byrd Rule,” which would have subjected the proposal to an unachievable 60-vote requirement.

Having dodged that Congressional bullet, the PCAOB is not out of the woods just yet. In a WSJ article last week, outgoing PCAOB Chair Erica Williams noted: “My biggest concern is that people pull back from the PCAOB’s mission and not provide the staff with the resources that they need to continue to deliver for investors.” She indicated that is a particular concern now given that fraud risk is heightened when the economy tightens. The article further notes:

Her departure could mark the start of a series of changes at the PCAOB, potentially with regard to its budget. Atkins, while an SEC commissioner in the 2000s, criticized the PCAOB’s budget, saying salaries paid to board members were disproportionately high.

The PCAOB, whose budget is nearly $400 million this year, is funded by fees paid by public companies and broker-dealers. The SEC requested to add $100 million to its fiscal 2026 budget if it were to be required to take on the PCAOB’s work, Atkins said at a House hearing in May, adding he would likely seek additional funds.

Williams focused on the need for PCAOB resources as part of her opposition to lawmakers’ previously proposed plan for the PCAOB’s elimination. She said in May that it would take years for the SEC to reassemble skilled inspections staff under lawmakers’ previously proposed plan for the PCAOB’s elimination. The PCAOB’s inspection division is its largest unit by far, at nearly 500 employees and about 45% of the budget.

– Dave Lynn