The Securities and Exchange Commission (SEC) initiated an examination of the Public Company Accounting Oversight Board’s (PCAOB) audit firm inspection process in September 2025, citing the importance of inspections to the board’s oversight of audit quality, the time since the commission’s previous examination in 2009, and industry concerns about consistency in inspection results, according to a congressional watchdog.
The examination was ongoing as of March 2026, according to a Government Accountability Office (GAO) report published on September 3, 2026. The report is largely about bank disclosures, but includes a section that discusses bank audits and PCAOB inspections.
The SEC Division of Examinations is assessing how PCAOB procedures and organizational structure promote the uniform application of inspection activities, the congressional watchdog said.
The commission oversees the PCAOB, which was established by the Sarbanes-Oxley Act of 2002 after accounting scandals at companies such as Enron and WorldCom led to massive investor losses. The SEC approves the PCAOB’s budget as well as standard changes and oversees its activities.
The SEC exam of the PCAOB’s inspection program follows a change in leadership at both regulators after the change in administration in early 2025. Whereas the SEC and the PCAOB during the previous Biden administration pursued aggressive rulemaking, enforcement, and inspection activities, the two regulators under current Trump administration have reversed course.
The GAO report notes that initiating an exam of the PCAOB’s inspections before 2025 would have presented risks for the SEC. In particular, the PCAOB and board leadership cited concerns about high or increasing deficiency rates from 2022 through 2024, leading to their conclusions that audit quality was declining.
The deficiency rate was 40% during the 2022 inspection cycle, 46% in 2023, and 39% in 2024. For comparison, the deficiency rate was 34% in 2021 and 29% in 2020, according to the PCAOB’s data.
“These results would merit closer review by SEC to assess PCAOB’s conclusions,” the GAO report said.
Academic studies also have questioned PCAOB inspections.
For example, one peer-reviewed 2021 study found that PCAOB inspections led auditors to become more conservative in estimating loan losses, which resulted in less accurate estimates overall.
A separate study of 20 auditors whose work had been inspected by the PCAOB found that some auditors disagreed with the PCAOB’s methods for evaluating audit risk and its standards for determining how much documentation was required.
“Initiating a new examination of PCAOB’s inspection process in 2025 affords SEC the opportunity to assess how well PCAOB is using its inspection process to oversee audits of public companies, which supports SEC and PCAOB’s shared investor protection mission,” the GAO said. “Examination findings can help SEC identify whether PCAOB should take steps to alter or improve its process for inspecting accounting firms and interpreting inspection results.”
SEC officials told the GAO that resource constraints and limited relevant staff experience had affected the ability of the agency’s Broker-Dealer and Exchange Examination Program to devote resources to PCAOB examinations.
The SEC had examined other PCAOB activities after 2009, including the board’s inspection program for broker-dealer auditors in 2023 and its governance and internal policies in 2022, according to the GAO.
In January 2026, the SEC transferred responsibility for PCAOB examinations from the Broker-Dealer and Exchange Examination Program to the FINRA and Securities Industry Oversight Examination Program. SEC officials told the GAO that the program had more available resources and relevant staff expertise and that its work reviewing self-regulatory organizations was more closely related to PCAOB’s role.
In the meantime, the PCAOB is in the middle of reforming its inspection program to focus more on a firm’s system of quality control.
