A panel of European audit firm regulators has warned that eliminating the U.S. Public Company Accounting Oversight Board (PCAOB) will have an adverse effect on international cooperation, particularly on audit inspections, according to a letter seen by Thomson Reuters.
The June 13, 2025, letter from the Committee of European Auditing Oversight Bodies (CEAOB) responds to a provision in a U.S. congressional budget reconciliation bill that would transfer the PCAOB functions to the U.S. Securities and Exchange Commission (SEC).
“Effectively, a completely new regulatory structure will mean that no U.S. audit regulator can carry out inspections of EU auditors to U.S. listed entities for a considerable amount of time (likely a few years) until new cooperation structures are established,” CEAOB Chair Panos Prodromides wrote to PCAOB Chair Erica Williams. “This would undermine trust and confidence in the U.S. capital markets.”
The letter, approved by all member nations and representing the views of 27 E.U. countries, follows similar concerns expressed in separate letters by German and French audit oversight bodies. The German regulators said they “were bewildered to learn” of the proposed legislation, while the French said that “the disappearance of the PCAOB would…likely…have damaging consequences in the short term.”
The U.S. legislative provision was included by the House Financial Services Committee to the budget bill which the House narrowly passed in May. The Senate Banking Committee has since included a similar, even tougher, provision for consideration. U.S. President Trump has called for the reconciliation bill to be finalized by July 4.
‘PCAOB is a well-established regulator’
In particular, the European committee said that “the PCAOB is a well-established regulator with an excellent infrastructure and a solid funding mechanism.”
The PCAOB’s operations are largely funded by accounting support fees paid by listed companies. The board is not a government entity and does not go through the appropriations process. As part of its oversight activities, the SEC appoints the PCAOB members and approves the board’s yearly budgets and changes to its standards or rules.
Congress established the PCAOB through the Sarbanes-Oxley Act of 2002 in response to accounting scandals at companies such as Enron and WorldCom, which resulted in massive job losses and tens of billions in investor losses.
Experts agree that the PCAOB inspections have improved audit quality and protected investors over the past two decades.
“In many ways, its work has become the benchmark for independent auditor oversight worldwide,” CEAOB Chair Prodromides wrote. “The PCAOB is also a long-standing and trusted counterpart authority for bilateral cooperation with EU audit regulators.”
Today, most E.U. audit regulators have cooperation agreements, including data protection provisions, with the PCAOB. None of the agreements allow for the transfer of responsibilities to the SEC.
“A change to the system could cause a considerable disruption in cooperation,” Prodromides wrote. “All international cooperation could likely be affected until the legal prerequisites under a new structure are established.”
He also cautioned that the European Commission could reassess and potentially repeal the current declaration of adequacy if there are changes to the supervisory and regulatory framework.
As of the end of 2024, E.U. firms registered with the PCAOB audited public companies listed on U.S. stock exchanges with a combined market capitalization of nearly $2.5 trillion.
“Also, Member States would have to enter into new cooperation and data protection agreements which are further prerequisites for the exchange of audit working papers between EU and U.S. regulators,” he further explained. “This, however, would only be possible when the relevant structure is in place and information on the legal role and competences including safeguards for information protection is available.”
Meanwhile, in an April 29 letter to House Financial Services Committee Ranking Member Maxine Waters (D-CA), PCAOB Chair Williams wrote that “it is simply not possible to replicate the PCAOB’s Successful programs without significant time and cost, resulting at a minimum in a lapse in inspections that could allow poor quality audits to go undetected and provide opportunities for auditors or issuers to commit fraud,” according to a copy seen by Thomson Reuters.
With congressional support, the PCAOB was finally able to secure an audit inspection agreement with China in August 2022.
“Renegotiating would be a real problem with the Chinese,” said former PCAOB founding member Daniel Goelzer who has also criticized the proposed bill along with other former regulators and academics.
China has been unhappy with President Trump’s proposed tariffs, and the two countries are in the middle of negotiations. The outcome is uncertain, but China is not likely to make it easy for U.S. regulators on other issues.
According to SEC staff research, the most common headquarters jurisdiction for foreign private issuers (FPIs)—foreign companies selling stock on U.S. public markets—in fiscal 2023 was mainland China, accounting for 22.6% of all FPIs.
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