As Congress considers consolidating the Public Company Accounting Oversight Board’s (PCAOB) functions into the Securities and Exchange Commission (SEC), board member Christina Ho, who has been critical of the current board’s leadership over the past three years, said that the board must reorient its work.
Under Erica Williams’ tenure as chair, the PCAOB has pursued an ambitious rulemaking agenda along with aggressive enforcement and inspection programs.
These expansive regulatory activities have been criticized by auditors of public companies who must comply with the board’s rules. However, many investor advocates welcomed the board’s efforts to update decades-old standards initially adopted from the AICPA following failures at companies like Enron and WorldCom.
In Ho’s view, the PCAOB “has done little to improve audit quality and has possibly harmed future audit quality, even though there has been no shortage of messaging that mentioned investor protection and audit quality.”
She made her remarks on May 16, 2025, at the 49th Kent State University Meonske Professional Development Conference in Kent, Ohio.
“To make matters worse, the PCAOB has also created confusing public narratives to sow distrust in public company audits and U.S. capital markets,” said Ho, who was the sole dissent in some of the newly adopted standards. She criticized the insufficient due process and rationale for the new rules.
Criticisms
Ho criticized the PCAOB for defining audit quality as compliance with auditing standards, focusing on the auditing process rather than outcomes.
“PCAOB programs all seem to be anchored on the assumption that a ‘check-the-box’ process on compliance with PCAOB auditing standards is the ‘be all and end all,’ which I believe is a flawed approach,” she said.
Comparing this to building a house, she said she would focus not only on the construction process but also on the quality of the house, ensuring it is safe, looks nice, and is durable.
“I am concerned that the PCAOB, being so focused on small details, regardless of their impact and materiality to the reliability of the financial statements, is causing it to miss the bigger picture and is doing a disservice to investors and U.S. capital markets and in some cases misleading investors, who just want to know whether they can rely on a company’s financial statements,” she said.
Ideas for Reforming PCAOB’s Work
In her prepared remarks, Ho did not explicitly discuss the potential elimination of the PCAOB but offered ideas on what she believes the board should do.
She believes the PCAOB should promote innovation in auditing through its standards or other guidance.
Although the board has stated that its standards are technologically neutral, Ho argues that the rapid pace of technological advances today warrants a more proactive approach.
“In fact, being neutral in this digital age is akin to discouraging the use of technology because our current standards do not address the benefits and risks of technology like Artificial Intelligence (AI), and our punitive inspection approach demands rigid adherence to a set of auditing standards that may be unfit for the paradigm of new technology like AI,” Ho said.
Given AI’s rapid evolution, she emphasized that the PCAOB cannot remain passive but must strive to keep up or get ahead of the technology curve.
The PCAOB has had a research project on technology for several years. In 2024 its Technology Innovation Alliance Working Group (TIA) provided recommendations on addressing the use of emerging technologies.
However, Ho noted that the board “has taken no concrete action over the past year that has yielded any demonstrable results with regard to technology-driven standards.”
The second area for reform is regulations, which Ho believes the PCAOB should “right-size.”
She argues that regulations should be adopted only when necessary, should be well-designed to solve identified problems, and should facilitate trust and innovation.
However, the current board’s standard-setting approach, in her view, “has focused in no small part on process and reporting, which is asking firms to take more of a compliance-oriented ‘check-the-box’ approach, that SEC Commissioner [Mark] Uyeda warned against.”
Moreover, the standards adopted by this board are more likely to hurt audit quality because auditors must implement many new standards in a relatively short period, disproportionately affecting smaller firms due to their limited capacity compared to larger firms.
She called on the PCAOB to evaluate the overall costs and benefits of all the new standards.
Ho cited the board’s inspection program as the third area needing a makeover.
In particular, inspection reports should provide severity ratings on identified deficiencies to offer more context.
“The concern I have about PCAOB inspection reports not distinguishing between material deficiencies and deficiencies that are not material extends to the management of the PCAOB’s enforcement program,” Ho said, citing the fourth area she wants to see changed.
She referenced Chair Williams’ speech on May 1 in New York, where Williams stated that “cases we investigate and ultimately decide to enforce involve complex and serious matters, including audit failures in cases involving financial statement fraud, taking on client work that firms can’t complete, altering work papers, and not performing sufficient work before signing audit opinions.”
Ho disagreed, offering statistics to support her view.
About 27% of the PCAOB’s enforcement orders between January 1, 2022, and March 31, 2025, consisted of “traffic violations,” where firms failed to comply with PCAOB reporting requirements, such as failing to file multiple forms timely but ultimately doing so, yet still being fined $25,000.
In addition, Ho criticized the board’s $400 million budget for 2025, which is 40% larger than the 2020 budget of $284.7 million.
She noted that the 2025 budget is larger than that of the Commodity Futures Trading Commission.
“I believe that there are significant cost savings that can be achieved while more effectively executing our mission by reorienting our programs in the ways I mentioned earlier,” she said.
This article originally appeared in the May 19, 2025, edition of Accounting & Compliance Alert, available on Checkpoint.
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