A former member of the Public Company Accounting Oversight Board (PCAOB) is calling for major reforms to the audit regulator, arguing that its structure has produced governance problems, unchecked spending, standard-setting gaps, inspection inefficiencies, and misplaced enforcement priorities.
Christina Ho, a former PCAOB board member, made her case in an article published in the Summer 2026 issue of Regulation, published by Cato Institute on June 22. Ho said her conclusions are based on her experience serving on the board for more than four years – from November 2021 to January 2026.
The PCAOB, created by Congress in 2002 under the Sarbanes-Oxley Act after the accounting scandals at Enron and WorldCom, was given an unusual structure. The board is a private nonprofit corporation, but it has regulatory powers and funds itself through fees assessed on public companies. Ho said that structure has contributed to budget growth and limited accountability.
She cited the Supreme Court’s 2010 decision in Free Enterprise Fund v. PCAOB, which found that the board’s dual-layer removal protections violated the Constitution’s separation of powers. The Court severed the unconstitutional provision and allowed the PCAOB to continue operating.
The case raised broader questions about the PCAOB’s structure, she said and cited earlier criticism from Peter Wallison of the American Enterprise Institute, who warned in 2005 that the board’s funding structure could lead to increased spending.
Ho criticized that the PCAOB’s budget grew by 40% from 2022 to 2025. Its 2025 budget exceeded that of the Commodity Futures Trading Commission, although the CFTC regulates the U.S. derivatives market and the PCAOB oversees about 1,500 audit firms.
“The PCAOB’s ability to levy fees on over 8,400 public companies provides essentially unlimited funding with no meaningful oversight,” Ho wrote.
The Securities and Exchange Commission (SEC) oversees the board, and its annual budget and standard and rule changes must be approved by the commission.
She also criticized the PCAOB’s governance structure, under which the board chair also serves as president and chief executive officer. She said the arrangement weakens oversight because the chair controls board meetings and agendas, concentrates authority in one person and limits the ability of other board members to check the chair’s power.
“The PCAOB operates under a governance structure that would not pass the litmus test for sound corporate governance if the PCAOB itself were a public company,” Ho wrote.
Ho said the PCAOB’s standard-setting process is disconnected from current audit practice, particularly in relation to technology. She wrote that the PCAOB’s standard-setting staff largely lack recent public company audit experience and that only two of the five current board members are certified public accountants with presumed public company reporting and auditing experience.
She said auditors are increasingly using artificial intelligence and machine learning to analyze large datasets, identify patterns and detect anomalies, but that the PCAOB has not issued substantive guidance on the responsible use of those tools.
Instead, Ho wrote, the PCAOB has focused on procedural and reporting requirements that encourage a compliance-oriented approach.
“The emphasis is on proving compliance with prescribed procedures rather than demonstrating that the audit effectively identified material problems in the company’s financial statements,” Ho wrote.
Further, she criticized the PCAOB’s inspection program. She said the board focuses heavily on reviewing individual audit engagements rather than firms’ overall systems for ensuring quality. In 2024, the PCAOB inspected 232 audit firms and 930 individual audit engagements.
PCAOB inspectors often identify deficiencies when auditors cannot show that they performed specific procedures or documented their work in prescribed ways, even when the auditor reached the correct conclusion about the company’s financial statements through other means, she claimed, adding that this has contributed to higher deficiency rates even as financial restatements have declined over the past decade.
Ho also said the PCAOB has devoted enforcement resources to minor infractions. Between January 2022 and March 2025, about 27% of PCAOB enforcement orders involved minor violations, including reporting failures. Those cases accounted for 6% of total civil money penalties.
She contrasted those cases with more serious violations, such as failures to detect fraud, audit opinions on materially misstated financial statements or violations of auditor independence requirements.
“The PCAOB’s aggressive and at times unreasonable enforcement posture over the past four years has unfairly painted the auditing profession as dishonest and incompetent, making the profession increasingly unappealing and further exacerbating recruitment and retention of talent,” she wrote.
Recommended reforms
Ho proposed two paths for reform.
The first would require Congress to transfer the PCAOB’s duties and powers to the SEC. Ho said this would place audit oversight under a government agency subject to the Appointments Clause, congressional appropriations, congressional oversight, the Administrative Procedure Act and the Paperwork Reduction Act.
Under that approach, the PCAOB could initially serve as an advisory body during a transition period. Within three years, she said, the PCAOB should be fully absorbed into the SEC, with standard-setting completed and enforcement handled by the SEC.
The second path would involve administrative reforms by the SEC and the PCAOB if Congress does not act.
A congressional effort to dismantle the standalone board failed last year.
Ho said the PCAOB should amend its bylaws to separate the roles of board chair and CEO. Under that proposal, the chair would continue to lead the board’s policymaking role, while a new CEO or president would handle day-to-day management and administration. The CEO would be appointed and removable by the full board, and any board member could call board meetings.
She also proposed that the PCAOB use its Sarbanes-Oxley authority to designate a professional group of accountants to help formulate technology-driven and other standards for board consideration. She said the group should include accountants with recent public company audit experience and expertise in artificial intelligence and emerging audit technologies.
In addition, Ho called for changes to the inspection program. She said the PCAOB should focus more on firms’ quality control systems and reduce the number of individual audit engagements inspected when a firm’s quality control system is found to be effective.
She also proposed consolidating PCAOB enforcement into the SEC. She said this would redirect resources from minor infractions to more serious violations, apply consistent enforcement standards, eliminate duplicative bureaucracy and focus enforcement on conduct that poses risks to investors.
Ho said reform is urgent because the current structure is discouraging innovation, creating fear in the audit profession, emphasizing procedural compliance over audit effectiveness and imposing costs on public companies and investors.
“The question is not whether reform is needed, but whether policymakers will act before the structural defects cause further damage to the auditing profession and the capital markets,” Ho wrote.
Some changes are already underway
While this article offers a more comprehensive set of reforms, Ho, as a sitting board member, was an outspoken critic of the PCAOB when it was led by Erica Williams, who pursued aggressive standard-setting and enforcement activities, much as the SEC did at the time during the Biden administration. While the board broke records at the time, as Ho pointed out, some of the enforcement actions were against firms for violating the simplest aspect of Form AP which harmed no investors.
The SEC, under Paul Atkins’ leadership now, changed course during the Trump administration. Some of the reforms at the PCAOB are already in progress. For example, as suggested by SEC Chief Accountant Kurt Hohl, PCAOB Chairman Demetrios Logothetis has announced that the board will modernize its inspections program to focus more on firms’ systems of quality control. The SEC has also created a SOX group within its enforcement division to better coordinate enforcement efforts between the commission and the PCAOB.
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