Now that the Public Company Accounting Oversight Board (PCAOB) on August 28, 2025, decided to postpone the implementation of its new quality control standard by one year, the Securities and Exchange Commission (SEC) is seeking comments to delay the effective date to December 15, 2026, instead of the original date of December 15, 2025.
The SEC oversees the PCAOB, and the board’s changes to its standards and rules must be approved by the commission.
While the SEC is seeking comments on the one-year deferral as required by the federal securities laws, this will likely be largely a routine exercise as Chair Paul Atkins and Chief Accountant Kurt Hohl are said to have urged the PCAOB to delay the standard’s effectiveness in response to a July request for a postponement by the Center of Audit Quality. The organization said some firms need more time to properly apply the significant changes required by the new standard.
The board in May 2024 adopted the rule that establishes new QC 1000, A Firm’s System of Quality Control, to require firms to identify risks that are specific to their audit practice. At the same time, the standard also mandates certain requirements that are intended to make sure that firms’ QC systems are designed, implemented, and operated with appropriate rigor. A divided SEC under the previous chair approved QC 1000 in September last year.
The SEC issued Release No. 34-103083, Notice of Filing and Immediate Effectiveness of Proposed Rule Change Postponing the Effective Date of Amendments to Board Standards, Rules, and Forms Adopted on May 13, 2024, to seek comments, which are due 21 days after publication in the Federal Register.
Under Section 19(b)(2)(A) of the Securities Exchange Act of 1934, the SEC has 45 days to act after publishing the board’s rule for public comment. The provision allows the SEC to extend the period by an additional 45 days if the agency determines that a longer period is appropriate, though it is unlikely to be necessary for this particular notice.
In the meantime, PCAOB member Christina Ho, who voted against the QC standard last year, applauded the decision to grant an extension, calling it “good blooms when reason prevails.”
Although the PCAOB curiously did not hold an open meeting to vote on the deferral, Ho had prepared a statement.
Ho had been openly critical of the PCAOB when Erica Williams was chair. Atkins’ predecessor, Gary Gensler, named Williams to head the board. In keeping with President Biden’s priorities, Gensler and Williams pursued aggressive regulatory agendas at their respective organizations.
In speeches, Ho criticized the pace and volume of standard-setting by the then-board. She believed that the PCAOB did not give proper rationale for the changes while imposing burdens and costs that may not justify benefits.
“This is indeed a new PCAOB, one that is much more deliberative and collaborative,” Ho said in her latest statement. “If we had operated under such principles, we probably would not need the action this Board is taking today.”
While she dissented on QC 1000, she said she didn’t do so lightly, emphasizing that she takes each of her votes seriously.
“When I dissent, it is because I believe the PCAOB has not clearly identified the problem to be solved; exceeded its statutory authority; failed to conduct a sufficient economic analysis; failed to adequately consider the comments of affected stakeholders; otherwise overreached; or a combination thereof,” Ho explained.
“I foresaw substantial complications arising from the implementation of QC 1000,” she said. “My overarching concerns with this standard centered on three key issues: the design-only requirement imposed on firms not actively engaged in public company audits, the complexities introduced by its misalignment with ISQM 1, and its overly prescriptive nature.”
ISQM 1 is a quality management standard issued by the International Auditing and Assurance Standards Board. The AICPA’s new QC standard is also largely based on ISQM 1.
Ho said that she supports the one-year extension because it became clear that the 15-month implementation was not enough for firms to implement.
She also said that the PCAOB could consider making changes to certain requirements during this one-year extension to make the requirements more cost-effective and pragmatic.
“Consistent with my dissenting statement on the adopting release, I continue to be concerned about the design-only requirement which requires inactive firms to invest in a quality control system that, in most cases, may never be used nor subject to inspection, making this requirement unnecessarily burdensome with no direct correlation to improving audit quality,” she said among other problems.
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