Republicans plan to scrap US audit regulator

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Republican lawmakers are planning to shut down the U.S. audit regulator, founded more than two decades ago after the Enron scandal, as part of a reform plan to provide Donald Trump's deregulation agenda.

The leadership of the House Financial Services Committee issued a proposal late Friday to eliminate the independent public company accounting oversight committee to include a huge tax and spending bill considered by Congress.

Under the draft legislation, taxes will be imposed on listed companies and brokerage dealers of PCAOB funds and the responsibility of the organization will be folded into the Securities and Exchange Commission.

PCAOB was established to monitor audit standards and regularly inspect companies that reviewed US listed companies after Enron went bankrupt in 2001, exposing the shortcomings of the previous self-regulatory system.

The accounting firm and the activist leadership of Chairman Erica Williams, chairman, which imposed tough new standards in law enforcement actions and extracted record fines.

Any effort to eliminate the agency may be in line with the Democrats’ boycott and may not be fully endorsed by the audit firm.

The Audit Quality Center, which represents the largest company, calls on the agency to respond faster to accounting firms, but has previously stopped calling for phase-out.

While PCAOB employees can have the opportunity to transfer their roles to the SEC, in many cases they have to make layoffs because the organization is not subject to the size of government compensation.

Critics believe such a move will greatly undermine the audit-assured inspection system.

However, Christina Ho, a PCAOB board member who opposes several Williams’ signature programs, said the SEC’s salary may be higher than that of many government agencies. “SEC has not been difficult to attract and retain talent,” she said.

The committee's draft legislation also removes any unallocated funds under Joe Biden's landmark climate legislation under the Inflation Reduction Act and cuts the Consumer Financial Protection Agency's budget.

However, it faces procedural obstacles. The entire House Financial Services Committee will consider legislation in the coming days, but whether it is included in the tax and expenditure bill, known as the settlement bill, will depend on negotiations in the Republican leadership in the House and Senate and whether it is considered a budget measure.

Sandy Peters, head of global advocacy at the CFA Institute, an investor professional institution, said the creation of PCAOB has led to a significant improvement in audit quality.

“The largest and most effective capital markets require a strong, non-political and independent audit regulator and accounting standards setter,” she said. “If capital formation is a government priority, that would undermine that.”