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Political Uncertainty Looms Over PCAOB as SEC Leadership Shifts

By:
Emma Slack-Jorgensen
Published Date:
Jan 30, 2025

GettyImages-513676272 Security Exchange Commission SEC

The oversight of public company accounting is split between two key agencies. However, according to the Wall Street Journal, one is subject to significantly more political influence than the other.

The Financial Accounting Standards Board (FASB) and the Public Company Accounting Oversight Board (PCAOB) are both under the supervision of the Securities and Exchange Commission (SEC), yet the PCAOB is far more vulnerable to political changes, the Wall Street Journal reported. 

The PCAOB, created by Congress through the Sarbanes-Oxley Act of 2002, was established to oversee the auditing of public companies following major accounting scandals. This would mean that its significant overhaul would need an act of Congress or a court ruling. 

Additionally, the SEC directly appoints and can remove PCAOB board members, making it more susceptible to political shifts.

In contrast, the FASB, which sets accounting standards, operates with more independence under the oversight of the nonprofit Financial Accounting Foundation, according to the Journal.  

To derecognize the FASB, the SEC would just have to revoke a policy statement from 2003 that stated that the FASB met the criteria of Sarbanes-Oxley and that its accounting rules are generally accepted.

The recent appointment of Paul Atkins as SEC chair under the Trump administration is expected to bring significant changes to the PCAOB, with speculation that its regulatory role could even be merged into the SEC. The previous two presidential administrations already overhauled the PCAOB’s leadership, and the trend is expected to continue.

Under Chair Erica Williams, the PCAOB pursued a stricter regulatory agenda, including a proposed rule on fraud detection that auditors strongly opposed. With the new administration, the PCAOB’s direction could shift toward deregulation, aligning more with industry concerns, the Journal said.

Meanwhile, the FASB remains relatively insulated. While its accounting standards must be enforced by the SEC, the board’s policymaking is less subject to direct political influence. Historically, corporate pushback has posed a greater challenge to FASB’s independence than government intervention.

As SEC leadership changes, the PCAOB is once again in the spotlight, facing potential restructuring or even elimination, reinforcing its position as the more politically vulnerable of the two boards, the Journal reported. 

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