Summary: The Trump administration is continuing with its efforts to shrink the size of the government, and the SEC has not been spared. Will Elon Musk’s Department of Government Efficiency strike the PCAOB next?
In the past several weeks, the Department of Government Efficiency (DOGE) spearheaded by billionaire Elon Musk has streamlined U.S. government departments and regulatory agencies, and a second round of mass firings and budget cuts will occur in the coming days and weeks as federal agencies faced a March 13, 2025, deadline to submit large-scale downsizing plans.
So, is DOGE going after the Public Company Accounting Oversight Board (PCAOB) as well?
Short Answer: No
The short answer is no because it is a nonprofit corporation that oversees accounting firms that audit public companies.
“Because PCAOB employees are not government employees, I don’t believe it could direct them to be fired or laid off,” said Daniel Goelzer who was a founding PCAOB member.
“I think the ‘mass layoffs’ at government agencies we read about stem from a directive that probationary employees be let go—that is, people who haven’t been on the job long enough to have full civil service protection,” he said of the first wave of layoffs that largely applied to relatively new government workers. “The probationary concept would not apply to PCAOB employees because they are outside the civil service system.”
Thus, technically the PCAOB is off limits to DOGE.
Long Answer: Yes: DOGE on SEC Then on PCAOB
However, the long answer is yes but in a roundabout way.
It would be “through SEC which must approve its budget, last done in December 2024 or through legislation,” said former Securities and Exchange Commission (SEC) chief accountant Lynn Turner who served on the PCAOB’s advisory groups.
This is because the SEC oversees the board as the capital markets regulator. The PCAOB’s auditing standards and yearly budget must be approved by the commission before taking effect. And it depends on how the agency wants to exercise its oversight authority.
The Biden administration emphasized regulation, and both the SEC and the PCAOB stepped up their enforcement activities and rulemaking.
Now by contrast, the Trump administration is reversing course with a deregulatory agenda and wants to shrink government. And the SEC even under Acting Chair Mark Uyeda has begun efforts to cut costs at the agency even if it is not funded by taxpayers.
The commission said it is laying off directors at its regional offices and is offering $50,000 to staffers who voluntarily leave. President Trump’s nominee for SEC chair, Paul Atkins, is waiting for the Senate confirmation process.
Through Budget Process
The spillover DOGE effect on the audit regulator will not be apparent anytime soon, however, because the 2025 budget was approved late last year when Biden appointee Gary Gensler was SEC chair, as Turner said.
The PCAOB’s spending for this year is set at $399.7 million, which is an increase of 3.9% over the 2024 budget of $384.7 million.
There is no history of changing the budget mid-year. And if necessary, the PCAOB would have to be the one to start the process of revising it, for example, if there is a wave of additional accounting firms that want to audit public companies because of a surge in initial public offerings (IPOs). But that has not been the case.
The SEC’s Office of the Chief Accountant works very closely with the PCAOB throughout the year. Thus, major decisions that the board makes are not a surprise to the commission and would also reflect commission views. This is true with the board’s budget, which the PCAOB votes on in November. The SEC commissioners then take it up to approve it some weeks later.
And two Republican-appointed SEC commissioners—Uyeda and Hester Peirce—last year voted against it, saying that the increase in the board’s budget in the past few years has been too high.
As PCAOB member Christina Ho said in her dissent during the board’s meeting in November, Peirce said that the nearly $400 million budget is 40% higher than the $284.7 million budget in 2020. “At this rate, the budget five years from now will be $560 million,” Peirce said.
Thus, Goelzer said that “it’s likely that the PCAOB’s staffing and budget will shrink” for the 2026 budget.
“But those things will probably be set in motion after Paul Atkins is confirmed and takes office,” added Goelzer who previously served as general counsel of the SEC. “And they probably will be based on Paul’s view of the proper size and role of the PCAOB, rather than on DOGE recommendations.”
When asked whether the SEC is pressuring the PCAOB to downsize, an agency spokesperson pointed to Uyeda’s statement on the board’s budget. Beyond that, “we decline to comment,” the spokesperson said.
The PCAOB also declined to comment.
Uyeda said that the 2025 budget may be increasing only 3.9% from 2024 compared to the double digit increases the past two years. But more importantly, he said the 2024 budget was already not reasonable or supportable.
He compared the PCAOB’s budget to the SEC’s.
“Assuming that the commission’s appropriation for the fiscal year 2025 will be the same as fiscal year 2024, the board’s budget will be 18.6% of the commission’s appropriations,” Uyeda said. As of August 2024, 659 audit firms performed an engagement under PCAOB standards.
By contrast, he said the SEC has a tripartite mission, overseeing trading in equity and fixed income markets, disclosures of public companies, activities of about 40,000 entities, including more than 3,400 broker dealers, 24 stock exchanges, 103 alternative trading systems, 10 credit rating agencies, 33 self-regulatory organizations, and six clearing agencies.
“Without discounting the importance of high-quality audits, I question whether the PCAOB resources should represent nearly 19% of the commission’s resources. Over the past four years, the scope of the two agencies missions has not changed materially,” Uyeda said. “However, in fiscal year 2021 the board’s budget was only 15.2% of the commission’s appropriations. Why has the PCAOB ’s budget, relative to the commission’s appropriations, increased by over 22% during this period? Now one might argue that perhaps the SEC has been underfunded, but this is Congress’ determination, and the last I checked is Congress was accountable to the voters and the public. Just as Congress expects the commission when it sets our appropriations to exercise fiscal discipline, the commission should also ask the board to do the same as part of its oversight responsibility.”
Atkins will have similar views when he becomes SEC chair. Moreover, he has never been a fan of the PCAOB.
When asked by Thomson Reuters in 2023, Atkins questioned whether a separate regulator was needed to oversee public company auditors because there is already one: the SEC.
In terms of budget, Atkins was a critic of large pay given to board members when he was a commissioner from 2002 to 2008. In 2007 he voted against the PCAOB’s 2008 budget, objecting to a 3.3 percent increase in board member salaries.
“As a matter of policy, I believe the board’s salaries are disproportionately high,” said Atkins at the time, as he displayed a chart comparing PCAOB salaries with those from executives at not-for-profit organizations and government agencies.
The 2008 budget raised then-chairman Mark Olson’s salary to $654,353 per year from $632,400, and each board member’s pay to $532,000 from $515,000. In 2009 the salary for chair increased to $672,676, and the four other members were paid $546,891. But the figures have remained the same for 16 years.
History of PCAOB and Goal of DOGE
The goal of DOGE is to cut wasteful government spending and save taxpayers money. But as a private organization, the board is not taxpayer funded. Corporations pay for the PCAOB’s operations.
Before the PCAOB was formed, accounting firms were self-regulated through the AICPA. But Congress stepped in to promote confidence in the financial statements of public companies following accounting scandals that wiped out investor money over two decades ago.
The House passed Sarbanes-Oxley of 2002 almost unanimously, and the Senate in July 2002 voted 99-0 to make it a law in response to large accounting frauds at the time. When Enron collapsed in December 2001, it was the largest bankruptcy in U.S. history. The company had cooked its books, and its auditors Arthur Andersen let it happen. Then six months later, the SEC brought charges against WorldCom. Other accounting scandals followed at Adelphia and Tyco.
Today the PCAOB also supervises broker-dealers that are regulated by the SEC. Dodd-Frank gave the PCAOB this authority in response the Bernard-Madoff ponzi scheme. Madoff’s theft of client assets was aided by his use of a single-partner accounting firm operating from a small office in a suburban strip mall. The auditor never bothered to review Madoff’s accounts or verify the existence of the securities that were reported on client statements. PL111-203
Under Sarbanes-Oxley, the PCAOB collects accounting support fees from public companies and broker-dealers.
As has always been the case, the largest category of the 2025 budget is personnel. It is $300 million, accounting for 75% of the total spending plan.
In explaining the board’s 2025 budget last year, Chair Erica Williams told the SEC that over half of the difference is due to inflation, which soared during the COVID-19 pandemic. The other half is related to increase in the number of staff by 12% from 2020. During that period, the work has also increased. And most of the increase in headcount is attributed to the Division of Registration and Inspections.
“Our goal over the past couple of years is to get the number of inspectors back in that division to the number that it was between 2013 and 2017 in our budgeted headcount,” she said. “Over that time, we have increased the number of inspections that we have done by 40 firms and 150 audits that we’ve inspected.”
She added that the board has to be an “extremely good steward of the resources,” adding that the PCAOB during her tenure has started to send 30 inspectors to China each year.
A small part of the budget increase has also to do with “a modest increase in compensation to our staff,” she said.
Sarbanes-Oxley authorized the board to provide pay that is comparable to “private sector self-regulatory, accounting, technical, supervisory, or other staff or management positions.”
Williams said that the board had been competing for talent as the number of accountants has been decreasing. She said that when she got to the PCAOB in January 2022, the board “had a lot of trouble attracting talent.”
This article originally appeared in the March 17, 2025, edition of Accounting & Compliance Alert, available on Checkpoint.
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