The Public Company Accounting Oversight Board (PCAOB) has withdrawn two disclosure rules that the accounting profession was generally against to ensure any final proposals would get the support from a Securities and Exchange Commission (SEC) that is now under the new Trump administration, Bloomberg Law reported.
According to an SEC notice, the proposed
rules on firm reporting and firm and engagement metrics and
related amendments to PCAOB Standards.
These proposed
rules on firm reporting were published for comment in the Federal Register on Dec. 5,
2024 while the proposed rules on firm and engagement metrics were published for comment in
the Federal Register on Dec. 11, 2024.
The notice indicated that the PCAOB said on Feb. 11 that it had pulled the projects after discussions with the SEC, which has to approve PCAOB rules prior to them taking effect. Both remain on the board’s rule-writing agenda.
“The PCAOB looks forward to continuing to work with the Commission and all stakeholders to protect investors and increase transparency,” the board said in a statement to Bloomberg Law.
Accounting Today reported that the PCAOB decided to withdraw the firm reporting and firm and engagement metrics standards from SEC consideration after consulting with the SEC to continue working toward versions of both projects that can earn the support to be approved. Both of the projects remain on the PCAOB's agenda.
According to the publication, this about face is an effect of the ongoing presidential transition. Republican SEC members, who currently control the regulator, have been against past board rules and its budget.
Auditors had asked the SEC to send the projects back to the PCAOB to study and review further. They said that the audit board was unable to show why it was necessary for investors and audit committees must do the added auditor reporting.
Approved by the board in November, the two proposals would have required the biggest audit firms to share financial details with their regulator and ask for detailed reporting regarding partner oversight and training of staff assigned to public company audits, Bloomberg Law reported.
The AICPA was on board with the decision. According to the Journal of Accountancy, An AICPA statement characterized the decision as "the right one.:
In the statement, Sue Coffey, AICPA's CEO–Public Accounting, noted that the AICPA had expressed apprehension that the "proposed requirements would have harmed the U.S. capital markets and the investing public. 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. The PCAOB's decision not to move forward with the rules is the right one."