PCAOB’s Leadership Changes Reflect Politics Overtaking Mission

Erica Williams just presided over the most consequential tenure of any Public Company Accounting Oversight Board chair since the board’s inception. She and the board, appointed by former President Joe Biden, boosted enforcement of audits that failed to meet standards, opened inspection access to Chinese audit firms, and sought to root out auditors who were defrauding investors.

With the forthcoming replacement of the entire board and the ouster of Williams, I don’t expect the incoming board to continue this progress. Instead, it likely will be one of the least effective PCAOBs in memory.

Securities and Exchange Commission Chair Paul Atkins, who sought Williams’ resignation, has demanded that the PCAOB “minimize” costs for companies and brokerage firms. That’s a subtle way to call for less enforcement and fewer effective inspectors.

Atkins has complained that the board members’ salaries—all frozen since 2009—are too high, and that the PCAOB’s budget has grown faster than the SEC’s. Yet, those remarks ring hollow as the SEC’s headcount has fallen by at least 12.5% since the start of the second Trump administration.

It’s a disingenuous comparison at best, akin to complaining about your friend eating their full meal just because you went on a diet. One need not preclude the other.

Because of the PCAOB’s independent funding structure, it can pay market wages for inspectors and hire more of them as needs evolve. The PCAOB is independently funded through the fees Atkins seeks to minimize and costs taxpayers $0 to operate.

I would argue that, given the challenges the profession faces and the need to modernize so many archaic audit standards, board members should be paid more, not less.

The audit profession today would be almost unrecognizable to an auditor who started when the PCAOB was created in 2002. AI audit systems can now scan documents, extract key information, and link that information to other evidence in minutes, transforming weeks of audit work into a mouse click.

AI audit agents don’t even need a mouse click. They can prepare follow-up questions or seek alternative evidence if the first task requires further investigation. For the audit work that is still performed by humans, more of it is performed not by US CPAs at the client site, but by offshore teams in India and the Philippines overseen by CPAs.

While AI is making audits more efficient, the use of the technology isn’t limited to good actors. Fraudsters are exploiting AI to deepfake executives and steal funds, create false documentation that looks official, and evade fraud detection tools—making auditors’ anti-fraud efforts more difficult and costly than ever. Deloitte predicts that AI-enabled fraud will reach $40 billion by 2027.

Meanwhile, audit standards are still designed for an environment where Excel was the advanced audit tool and audit work was performed by local teams in a windowless conference room.

The board under Williams sought to change that. In 2023, it modernized its confirmation standard to allow for electronic communications such as email. That may be the last meaningful modernization for some time.

The SEC’s politicization fits a worrisome trend. Before the first Trump administration, board members were appointed to five-year staggered terms and were rarely removed before their terms ended.

President Donald Trump broke norms in his first administration by firing the board despite their terms being designed to fit outside four-year election cycles, similar to how he replaced the Federal Reserve chair and fired the FBI director before the end of their terms.

Now, the PCAOB is looking more like just another political entity subject to the whims of the president. It may be good politics, but it’s bad for audit quality and investors.

Like with the IRS, we should be increasing the PCAOB’s funding and staffing. If someone cared about audit quality and took seriously the role of protecting investors, they wanted to work at the PCAOB under Williams.

The goal was clear. She backed up her often pointed words with actions. Those same resolute inspectors and enforcement lawyers are unlikely to be drawn to a weakened and funding-threatened PCAOB.

Williams and the board worked to shape the PCAOB into what was envisioned when the Sarbanes-Oxley Act was enacted in 2002. Atkins and the incoming board are likely to roll back that evolution. Audit firms may celebrate, but investors should worry. The cops are now off the beat.

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.

Author Information

Jack Castonguay is a CPA, associate professor of accounting at Hofstra University, and vice president of content development at KnowFully Learning Group.

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