The proposal of Republican lawmakers in the U.S. House of Representatives to eliminate the Public Company Accounting Oversight Board (PCAOB) was published late on April 25.
This draft legislation from the House Committee on Financial Services leadership will be a part of the giant tax and spending bill that is currently being considered in Congress, the Financial Times reports.
Under the proposed legislation, Financial Times says that a levy on listed companies and broker-dealers that finances the PCAOB would be eliminated and the agency's responsibilities would be folded into the Securities and Exchange Commission (SEC).
According to the Financial Times, accounting firms fought against PCAOB Chair Erica Williams's leadership. Her tenure has been marked by strict standards and record fines through enforcement actions. Any initiative to take out the agency will probably not get the full endorsement of audit firms.
The Center for Audit Quality (CAQ), which represents the biggest firms, has, in the past, asked that the agency be more responsive to accounting firms, but has not gone as far as to advocate for shutting it down, the Financial Times says.
“Oversight models may evolve, but what should not change is the profession’s accountability to the capital markets and the need for a system that supports maintaining high standards of audit quality,” CAQ chief executive Julie Bell Lindsay stated on April 26.
PCAOB employees could be allowed to transfer their roles to the SEC, but they would have to take pay cuts in many instances. This is because the PCAOB is not subject to government pay scales. However, Christina Ho, a PCAOB board member who has opposed many of Williams’ initiatives, said that SEC salaries could be higher than those in many government agencies. “The SEC has not had difficulty attracting and retaining talent,” she said, according to the Financial Times.
Those who oppose shutting the PCAOB down have said that this move would considerably upset the audit-firm inspection framework, the Financial Times reports.
The committee’s proposal also takes away any unallocated funds under a $1 billion green retrofitting program for housing that was brought under the 2022's Inflation Reduction Act and eliminates the Consumer Financial Protection Bureau's budget.
There is still a long road ahead as the draft legislation might encounter procedural hurdles. The full House Committee on Financial Services will mull the legislation in the coming days.
Whether it will be included in the tax and spending bill—which is known as a reconciliation bill—will be dependent on the outcome of negotiations among the Republican leadership in the House and Senate and if it is deemed as a budgetary measure, the Financial Times reports.