Audit Firms Aren’t Feeling the Heat From PCAOB, SEC Enforcers
November 3, 2025
Since Paul Atkins was sworn in as chair of the SEC in April and Erica Williams resigned as PCAOB chair in July, enforcement actions against audit firms have dropped considerably, according to a new report.
Since Paul Atkins was sworn in as chair of the Securities and Exchange Commission in April and Erica Williams resigned as Public Company Accounting Oversight Board chair in July, enforcement actions against audit firms have dropped considerably, according to a new report.
The report, Enforcement Activity Involving Auditors – 2025 Q3 Update, from The Brattle Group analyzes overall enforcement activity from the PCAOB and the SEC during the first nine months of 2025—comparing it to activity from 2018 to 2024—and identifies developments likely to influence auditor oversight in 2026 and beyond.
According to the report, with the exception of a single action issued prior to SEC Chair Gary Gensler’s resignation on Jan. 20, 2025, the SEC didn’t initiate any new enforcement actions against auditors in 2025 through the end of the third quarter. The PCAOB initiated 32 actions over the same period, comparable to levels in prior years, though all but one of those took place before Williams’ departure in July.
Regarding SEC enforcement activity from Q1 to Q3, the report shows:
SEC enforcement action in 2025 is trending to be at its lowest level since the seven actions in all of 2024, 10 in 2021, and 11 in 2020. The SEC initiated one action in the first nine months of this year involving one individual respondent on Jan. 17, prior to Gensler’s resignation on Jan. 20—the same day as Donald Trump’s second presidential inauguration. A $30,000 settlement was reached between the SEC and the respondent.
In comparison, in the first three quarters of 2019, the year with the highest Q1 to Q3 activity in the report’s sample, the SEC initiated 20 actions involving 35 respondents (22 individuals and 13 firms).
The report lists the following highlights of PCAOB enforcement from Q1 to Q3:
Despite the change in presidential administration and uncertainties about the future of the U.S. audit regulator, PCAOB enforcement activity in the first three quarters of 2025 was at its second-highest level since 2017.
31 of the 32 actions brought by the PCAOB in Q1 to Q3 were brought prior to Williams’ resignation as chair on July 22.
15 of the 32 actions (47%) brought by the PCAOB during Q1 to Q3 involved U.S. respondents (nine individuals and 11 firms). In the 17 actions involving non-U.S. respondents, only two involved an individual respondent, and 16 firms were charged.
22 of 27 actions (81%) involving firm respondents in Q1 to Q3 alleged violations related to the firms’ systems of quality control.
Five of the 11 actions brought against individuals alleged violation of Rule 3502, Responsibility Not to Knowingly or Recklessly Contribute to Violations.
The PCAOB imposed penalties of more than $17.4 million in the first three quarters of 2025, more than total annual penalties imposed by the PCAOB every year except 2023 ($20 million) and 2024 ($35.7 million).
All but $100,000 was imposed prior to Williams’ resignation.
Nearly two-thirds of Q1 to Q3 penalties ($11.25 million) were imposed on four foreign affiliates of Big Four accounting firms for violations related to improper answer sharing on internal training exams.
Nearly 20% of Q1 to Q3 penalties ($3.4 million) were imposed on nine foreign affiliates of a Big Four firm for allegedly inaccurate Form APs, Auditor Reporting of Certain Audit Participants, in violation of Rule 3211.
Two accounting firms were required to engage an independent consultant to review and make recommendations regarding their systems of quality control.
Notable Q3 2025 developments highlighted in the report include:
Judge Margaret Ryan was appointed director of the SEC’s Division of Enforcement, a notably unconventional pick for the commission’s top enforcement role.
The SEC established a cross-border task force, which will initially focus on foreign companies engaged in potential U.S. securities violations, as well as gatekeepers, such as auditors and underwriters.
The PCAOB was spared elimination in Trump’s 2025 budget reconciliation package, after a provision to dissolve it was struck down under the Byrd Rule.
Williams resigned at the request of SEC Chair Atkins, which was followed by a call for candidates to fill all five PCAOB board positions.
The PCAOB postponed the adoption of its new quality control standard (QC 1000, A Firm’s System of Quality Control), intended to strengthen audit quality, by one year. Originally scheduled to take effect on Dec. 15, 2025, it is now set for Dec. 15, 2026.
Looking ahead to 2026, the developments of the first three quarters of 2025 suggest a marked shift in the enforcement landscape for auditors, the report states:
Both the SEC and PCAOB appear increasingly focused on audits of foreign-issuer clients, particularly where investor harm flows from audits that failed to detect fraud.
Under a reconstituted PCAOB board, we expect to see a shift in PCAOB enforcement activity away from technical registration and reporting violations, such as Form AP filing failures—which accounted for nearly 40% of 2025 actions disclosed prior to Chair Williams’s resignation—towards fraud or blatant audit failures. The confluence of these factors, along with Chair Atkins’s focus on individual wrongdoers, means that audit firms serving foreign-issuer clients will likely face higher scrutiny, with greater individual accountability.
“The first three quarters of 2025 were a period of transition for auditor enforcement, shaped by leadership transitions—including the swearing in of SEC Chair Paul Atkins in April—and the accompanying shift away from the aggressive enforcement stance of prior administrations,” Alison Forman, co-Leader of Brattle’s accounting practice and a co-author of the report, said in a statement. “The muted pace of enforcement in Q3 likely foreshadows a more sustained realignment of priorities.”
[CPA Practice Advisor]
