US Audit Board Needs Structural Reform, Insulation From Politics

The Public Company Accounting Oversight Board is supposed to provide stable, expert oversight of audit quality in US capital markets. That stability is increasingly elusive.

As technology reshapes auditing and financial reporting, the PCAOB’s governance structure has made it vulnerable to political flights of fancy that undermine regulatory consistency, delay innovation, and distract from its core mission.

Recent budget changes and changes in board composition highlight the problem. The PCAOB’s inspection budget was cut by nearly 10% this year following a roughly 40% budget increase from 2022 to 2025. The entire board was replaced with new members on Jan. 30, representing the third leadership overhaul in less than 10 years.

Lengthy interim appointments caused the strategic direction of the PCAOB to remain undefined and leaving it rudderless. While a lag in top leadership placements is common in government, frequent changes in leadership and strategic direction aren’t conducive to an optimal standard-setting environment, adding unnecessary delays.

The more consequential issue is volatility. With each change comes a new strategic priority.

The 2022 strategic plan included a renewed focus on enforcement. It also included an aggressive standard-setting agenda that proposed significant prescriptive guidance that is more conducive to check-the-box auditing and moving away from a principles-based approach. This shift was apparent in several PCAOB proposals, including the noncompliance with laws and regulations and firm reporting and firm and engagement metrics.

Volatility reflects structural weakness. Strategic priorities that change sharply with political leadership produce regulatory whiplash. Firms struggle to plan investments, advisory groups lose influence, and longer-term governmental initiatives—particularly those involving technology upgrades—are delayed or deprioritized.

Such volatility also affects the willingness of firms to continue performing public company audits. The number of US firms registered with the PCAOB dropped by about 25% between 2021 and December 2025, according to former board member Christina Ho. Over time, instability erodes confidence in the oversight system and weakens its ability to respond to market evolution.

Structural reform is crucial to insulate the PCAOB from short-term political pressures and to reinforce its statutory mission. There are three ways to accomplish this.

First, standard setting must be more stable, transparent, and grounded in demonstrated audit quality outcomes. New requirements should address material risks and reflect operational realities. They shouldn’t add complexity that increases cost and deters talent without clear benefit.

Advisory groups with deep expertise in auditing, financial reporting, and technology should play a more central role, and the PCAOB should clearly explain how stakeholder input informs final decisions.

Second, the inspection process requires modernization. Inspections should prioritize systemic and high-risk issues rather than minor deficiencies that consume significant firm and regulatory resources.

Communication of inspection results should be clearer and more constructive, firms should have access to a meaningful and timely appeals process, and response timelines should reasonably accommodate firm size and capacity.

Third, enforcement should be better aligned with investor protection. Actions should target egregious audit quality failures—not technical or administrative errors that could be addressed through remediation or guidance.

Enforcement also should be more clearly separated from inspections to avoid incentives that distort inspection outcomes. Where PCAOB enforcement overlaps with Securities and Exchange Commission authority, both entities should pursue efficiencies to reduce duplication of effort.

Overlaying all of these reforms is the need for a coherent, forward-looking technology strategy. Recent emphasis on integrity and regulatory simplification is important, but it’s ultimately insufficient. Innovation is reshaping how audits are planned, executed, and reviewed.

Without a stable, expert-driven framework that supports the responsible adoption of new tools, regulators risk either falling behind market practices or impeding improvements that could enhance audit quality.

Debates over annual budget increases or cuts miss the larger issue. The real risk to audit oversight isn’t a single funding decision, but a governance structure that allows regulatory priorities to swing in the political winds. Structural reform—designed to promote continuity, expertise, and accountability—is the only durable solution.

Until that reform occurs, public companies and audit committees must remain vigilant. Active engagement with auditors on technology use, firm capacity, inspection history, and quality management is essential in an environment of growing complexity. In a rapidly evolving market, regulatory instability is a risk the system can ill afford.

The PCAOB was meant to be a steady steward of audit quality. To fulfill that role in a technology-driven economy, it must be insulated from political volatility and recommitted to long-term, strategic oversight.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

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Allison Henry is vice president of professional and technical standards at the Pennsylvania Institute of Certified Public Accountants.

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