PROPOSED FEDERAL BUDGET WOULD TRANSFER THE AUTHORITY OF THE PCAOB TO THE SEC

The Trump administration released its proposed fiscal year 2021 federal budget on February 10, 2020.  Under the proposed budget, the authority of the Public Company Accounting Oversight Board (“PCAOB”) would be transferred to the Securities and Exchange Commission (“SEC”) beginning in 2022.  According to the budget, this would eliminate the “duplicative” responsibilities of the two regulators and “reduce regulatory ambiguity.”

The PCAOB, created as part of the Sarbanes-Oxley Act of 2002, is tasked with overseeing the audits and auditors of public companies and other issuers in order to ensure audit quality and the reliability of information provided to investors.  The proposed budget explains that the SEC is already responsible for similar duties as the PCAOB including investigating federal securities law violations and imposing discipline on public accounting firms.  

The effective elimination of the PCAOB has been met with criticism.  There is skepticism that the SEC would be willing and able to duplicate the PCAOB’s focus on audit quality and oversight of auditors.  Although the PCAOB has faced criticism for its role in misconduct involving KPMG and other shortcomings.