Key Points

  • The U.S. Securities and Exchange Commission (SEC) on Thursday approved the Public Company Accounting Oversight Board's (PCAOB) fiscal year 2026 budget of $362 million, a 9.4% decrease from the prior year. At the same time, the SEC reduced the accounting support fee by 18.4% to $306 million, thereby lowering the funding costs borne by public companies and broker-dealers.
  • Additionally, the SEC cut the compensation of the PCAOB chair and other board members by 52% and 42%, respectively. SEC Chair Paul Atkins stated in a release that the compensation adjustments are intended to "better align with the spirit of public service," while emphasizing that the PCAOB's mission "remains critically important."
  • Atkins said, "Whether as a board member or now as Chair, I have always recognized—and continue to recognize—the importance of driving improvements in audit quality. However, all regulators, including the SEC and the PCAOB, must continuously assess whether the current approach to fulfilling their responsibilities benefits investors without unduly burdening companies."

In-Depth Analysis

The PCAOB is an independent regulatory body established by the U.S. Congress in 2002 following the multibillion-dollar accounting scandals at Enron and WorldCom. In recent years, as the Trump administration seeks to ease regulations and cut federal spending, the board has faced political pressure and could even be abolished.

Previously, a provision aimed at folding the PCAOB's authority into the SEC, effectively dissolving or restructuring the board, was removed before the One Big Beautiful Bill Act was passed, giving the board a reprieve. But PCAOB observers say the board could still be "weakened" or "neutered" through other measures such as budget cuts.

Francine McKenna, an adjunct professor of accounting at Montclair State University in New Jersey and author of the accounting newsletter The Dig, predicted that the budget reduction will prompt the board to scale back enforcement activities. "Enforcement is really where the squeeze will be," she said in an interview on Thursday.

McKenna had previously expected the PCAOB to be abolished, but now she believes the budget signals that the board will continue to operate, yet will only pay "lip service" to its regulatory powers and oversight responsibilities.

McKenna noted that this budget "is one of many levers aimed at signaling that the PCAOB's function as a regulator of accounting firms that audit public companies will be diluted." She added that the board's funding cuts are part of Atkins' and the current administration's policy direction of easing regulations and promoting IPOs.