Audit Oversight Board Set for Renewed Industry-Friendly Strategy

The US audit regulator is poised to welcome a new slate of leaders in 2026, but the watchdog’s pivot to prioritize the concerns of the industry it regulates is already underway.

The Securities and Exchange Commission has laid out its agenda for the Public Company Accounting Oversight Board, all while it reviews candidates to steer the audit board through an era of disruption. Private equity investments have replaced traditional partner ownership models, while artificial intelligence has expanded into the biggest firms’ core offerings.

Among the PCAOB’s new marching orders: be more responsive to the audit firms it oversees, SEC Chief Accountant Kurt Hohl said in December. That includes revamping inspections to focus less on the work of front-line auditors while leaning more heavily on the work of international standard setters to update the board’s aging rulebook.

Other priorities, however, could compete for the audit board’s attention.

Those include rapid changes in firm ownership that threaten guardrails meant to deliver sound, independent audits. The wave of private equity investments has sparked proposed updates to the profession’s ethics code as US regulators contemplate similar rule changes.

The board should prioritize driving audit improvements while managing change, said Helen Munter, former PCAOB inspections director and CEO of Adigeo Consulting LLC. “The challenge is keeping the work going while the board sets its priorities.”

Policy Pivot

Since 2017, the PCAOB has whipsawed between approaches that first catered to industry aims before favoring investor objectives under successive board chairs. Now, the board is swinging back toward auditors’ expectations.

Among Hohl’s ideas, any rule-writing, such as overhauling how firms police the quality of their work, should align with international audit standards, which provide a baseline for global firms.

The board delayed the effective date of its quality controls standard, giving firms until December to prepare. Auditors have urged the board to use the yearlong extension to retool its requirements and questioned the need for multiple differing standards.

Hohl also has urged the PCAOB to seek public input on which standards warrant a rewrite and to set up a formal process to help auditors apply its rules. At the same time, new board members will be handed a budget that halves their pay and extracts 9% spending cuts overall.

Preventative steps like giving firms an avenue to vet their audit methods would provide welcome clarity to what can be vague rules, said Joe Lynch, managing director with Johnson Global Advisory, which helps firms navigate PCAOB requirements.

“It’s not being soft,” Lynch said. “It’s getting it right.”

Hohl, who previously held leadership roles in the audit practice at Ernst & Young, also wants to revamp routine firm inspections to focus on the role of top leaders and their audit practice oversight. That would ease pressure on auditors and the need to review individual audits.

The board was forced to shelve several investor-backed rule packages advanced by Biden-era PCAOB Chair Erica Williams in the run-up to Trump’s second term. Auditors decried the rapid rollout of standard changes under Williams as the board pushed to meet longstanding investor demands for tougher rules.

That approach was “misguided,” said Jeff Johanns, associate accounting professor at the University of Texas at Austin. “The PCAOB in its standards setting has to narrow their focus to issues that are timely and critical,” Johanns said.

Private Equity and Ethics Guardrails

A wave of private equity groups taking stakes in US accounting firms has transformed the top of the market, with about half of the 30 largest US firms accepting outside capital over the past five years. That’s triggered attention from the audit regulator, which plans to scrutinize PE-backed firms during upcoming inspections.

That industry shakeup also warrants a fresh look at US conflict-of-interest rules and whether they meet the needs of the market, Hohl said.

Meanwhile, the American Institute of CPAs trade group has launched a project to update its own ethics rules setting guardrails for private equity and other ownership structures. A December proposal from the trade group aims to address risks that outside owners could exert undue influence on audit partners through performance targets or compensation.

The private equity boom shattered records last year with more than 80 deals announced. The volume of dealmaking is on pace to hit another record in 2026, said Art Kuesel, a consultant who helps accounting firms vet PE offers.

Outside investors continue to chase the 500 largest firms but even smaller firms could receive inquiries as investors target the sector’s steady, recession-proof revenues, Kuesel said.

AI and the Workforce

Demand for staff is expected to remain steady in 2026 among the biggest US accounting firms, even as AI lessens the need for entry-level recruits.

“It feels like we’re back in 2019 again,” said Mark Smith, executive director for US CPA and professional services at SR Staffing.

Industry-wide layoffs since 2024 marked a readjustment in staffing needs after a post-pandemic hiring binge. Some firms also cut staff after inking private equity deals and to separately address a downturn in transaction advisory work.

KPMG and Deloitte cut jobs from their audit and federal contracting businesses respectively. PwC cut 1,500 workers last April, its second mass layoff in a year, and followed up with additional reductions in the fall. The firm also signaled an altered hiring outlook last May when it announced it would scale back campus recruiting and welcome a smaller intern class.

Yet the largest firms have also spent billions of dollars transforming how front-line professionals work and the services they deliver with generative AI and related technologies.

The pivot to AI-backed services alters what roles firms look to fill, with experienced professionals who can stand behind their judgments in demand. Firms also look to fill roles in managed services and transactions work and other in-demand offerings, said Geremy Cepin, executive recruiter and principal with Korn Ferry.

“Hiring has continued in priority areas because firms, they can’t afford to step back,” Cepin said.