Dive Brief:

• Securities and Exchange Commissioner Hester Peirce criticized approval of a 12.6% expansion in the 2023 budget for the Public Company Accounting Oversight Board (PCAOB), warning that the “ballooning” increase “may facilitate mission creep” by the agency overseeing firms that audit public companies.
• The PCAOB has shown signs of potentially overstepping its mandate by signaling excessive reliance on enforcement, reconsidering audit standards without clear justification and indicating that it will identify issuers or broker-dealers whose audits are flawed, rather than just the erring auditing firm, Peirce said. 
• “A smaller budget might assist the PCAOB in being more selective, hewing more closely to its narrow mandate and better stewarding its resources,” Peirce said in a statement after the Securities and Exchange Commission (SEC) approved the PCAOB budget on Dec. 23.

Dive Insight:

The PCAOB, created under the Sarbanes-Oxley Act of 2002 after the Enron accounting scandal, must gain SEC authorization for its budget and changes to auditing standards.

The SEC approved a $349.5 million budget for the PCAOB and a 10.6% increase in its “accounting support fee” to $329.4 million. The fee is assessed from public companies and broker-dealers.

Soon after becoming SEC chair in April 2021, Gary Gensler shook up the PCAOB leadership and called for tougher regulation of audit firms.

“The PCAOB plays a critical role to ensure that investors can trust a company’s financial disclosures,” Gensler said in a statement. “I’m glad to support this budget, providing the PCAOB the resources to promote its mission under the Sarbanes-Oxley Act, benefiting investors and issuers alike.”

The PCAOB is insufficiently accountable to the public and, through the accounting support fee, imposes an onerous burden on public companies and broker-dealers, Peirce said.

“The ongoing ballooning of the PCAOB’s budget and associated accounting support fee is not a trivial matter,” she said. “The accounting support fee adds to the cost of being a public company or an SEC-registered broker-dealer.”

Peirce in a speech in October called for the elimination of the PCAOB, saying that the SEC should streamline oversight of auditors and better deploy regulatory resources by taking over the PCAOB’s responsibilities.

“The PCAOB budget process is a clunky accountability tool,” Peirce said in her recent statement. “A structure that would afford Congress more direct oversight of the audit regulator could enhance its efficiency and accountability.”