Senate GOP Plan Erases Audit Board, Curbs SEC Oversight Fees (2)

Senate Republicans would eliminate the US audit watchdog and transfer its mission to the SEC, but prevent the Wall Street regulator from raising fees to pay for its expanded mission, according to a draft spending plan released on Friday.

The Senate Banking Committee would eliminate the Public Company Accounting Oversight Board and reassign its role regulating the work of auditors to the Securities and Exchange Commission. The proposal is similar to a bill the House narrowly passed last month.

Unlike the House measure, however, the Senate would bar the SEC from using revenue from transaction fees to pay for staff and other resources related to auditor oversight. The plan is part of a sweeping tax-and spending-bill that is meant to enact the Trump administration’s agenda.

The legislative change would unwind a key provision of landmark corporate reforms Congress enacted in 2002 after accounting scandals toppled Enron Corp. and WorldCom Inc. Investors lost billions in the aftermath of two of the largest bankruptcies in US history, and PCAOB was established to help prevent similar scandals.

The board drafts and enforces audit standards and inspects the work of auditors based in the US and around the world, including China and Hong Kong, to ensure investors can rely on corporate accounting of listed stocks.

“This would hand an opportunity to China while putting American investors at risk,” board Chair Erica Williams said in a statement on the Senate provision.

SEC Chair Paul Atkins told lawmakers this week that he would seek additional funding if Congress handed the commission the responsibility of regulating auditors. He initially set aside $100 million out of an otherwise flat $2.1 billion spending plan to perform inspections and enforce audit standards.

The SEC declined to comment Friday.

Transaction fees on the sales of securities fund the commission’s operations. US companies, brokerages and audit firms pay fees that fund the PCAOB’s $400 million budget.

Eliminating the board and what committee Republicans called its “duplicative” functions would save $771 million over 10 years, according to committee statements.

Williams has cautioned that eliminating the board would also undermine the board’s international agreements allowing it to scrutinize the work of foreign auditors. In 2022, with the help of Congress, the board reached an agreement with Chinese regulators for the first time providing access to accountants who audit $1.1 trillion of stocks listed in the US.

Committee member Sen. Chris Van Hollen, D-Md., warned earlier this week that sunsetting the audit regulator would run afoul of Senate rules. A group of the board’s proponents sounded similar alarms about using the fast-track budget process known as reconciliation.

“Republicans are trying to abolish this key regulator, which will create serious risks for financial markets, investors, and our economy,” Sen. Elizabeth Warren, the Banking Committee’s top Democrat, said in a statement.