PCAOB Gets New Life—For Now — Thanks to the Senate’s Nonpartisan Referee
June 23, 2025
Republican lawmakers' plan to fold the PCAOB into the SEC hit a snag last Thursday when it was determined in the Senate that the provision in the GOP tax-and-spending bill violates the "Byrd Rule."
The Public Company Accounting Oversight Board had one foot in the grave last month when House Republicans narrowly passed their “One Big, Beautiful” tax-and-spending bill, which contains a provision that would essentially end the PCAOB as we know it.
Under the legislation, which would advance President Donald Trump’s legislative agenda, accounting support fees from Securities and Exchange Commission-registered public companies and broker-dealers that are used to fund the PCAOB would be cut off. In addition, all of the PCAOB’s responsibilities would be moved under the SEC, which oversees the audit regulator.
The Trump administration has made it a top initiative to reduce regulation and cut costs, which is why Republicans are trying to abolish the PCAOB. Project 2025, a conservative blueprint released last year on how the federal government could be reshaped under a second Trump term in the White House, called for the PCAOB’s regulatory functions to be merged into the SEC.
Republicans on the Senate Banking Committee recently said folding the PCAOB into the SEC would save approximately $771 million over a 10-year period.
The Senate is now crafting its own version of the budget bill. But according to a June 20 Wall Street Journal report, GOP lawmakers’ plan to fold the PCAOB into the SEC hit a snag last Thursday when the Senate parliamentarian—the nonpartisan official who interprets the Senate’s complex rules and has a major influence in the day-to-day running of the upper chamber—determined that including the provision in a broader tax bill violates the “Byrd Rule.”
The WSJ article states:
The Senate parliamentarian late Thursday ruled out the Public Company Accounting Oversight Board plan and several other provisions in Senate Banking Chair Tim Scott’s proposed addition to Republicans’ so-called big, beautiful bill, according to Senate Budget Committee ranking member Jeff Merkley’s office. Proposals to place a funding cap on the Consumer Financial Protection Bureau, reduce the pay of Federal Reserve staff and lower funding for the Office of Financial Research are also ineligible to be part of the proposed legislation.
The parliamentarian said these provisions violate the Senate’s Byrd Rule, a law named for the late West Virginia Democratic Sen. Robert Byrd that prevents lawmakers from using the special fast-track budget reconciliation process to advance policies with fiscal effects that are merely incidental to their broader aims. The move means that 60 senators would need to vote to waive the rule to keep the provisions. Otherwise, Senate Republicans will have to remove them from the package or alter them in ways that comply.
In a statement on Friday, Scott (R-SC) said he “remains committed to advancing legislation that cuts waste and duplication in our federal government and saves taxpayer dollars.”
“As it stands now, the Banking Committee’s reconciliation provisions will delay the implementation of Section 1071 of Dodd-Frank, which reduces CFPB spending and protects the privacy and data of small business owners; rescind unused funds earmarked for green initiatives to give HUD discretion in funding critical housing programs; and save taxpayer dollars by eliminating an unnecessary reserve fund at the SEC. My colleagues and I remain committed to cutting wasteful spending at the CFPB and will continue working with the Senate parliamentarian on the committee’s provisions,” Scott said.
PCAOB Chair Erica Williams was pleased with the development, saying in a statement, “This is good news for millions of Americans whose retirement savings and investments would be put at risk by eliminating the PCAOB.”
Williams, a lawyer who is in her second term as chair of the U.S. audit regulator and previously worked at the SEC for 11 years serving in various roles, including as deputy chief of staff under chair Mary Jo White, has repeatedly said that she admires and respects the staff at the SEC and the work they do. But she also has stated that the SEC “is different from what we do here at the PCAOB.”
Most recently, during a speech at the 2025 ALI-CLE Accountants’ Liability Conference in Washington, D.C. on June 3, Williams said, “The unique experience and expertise built up by the PCAOB over decades cannot simply be cut and pasted without significant risk to investors at a time when markets are already volatile. In the more than 20 years since, the PCAOB, led by its expert staff, has made invaluable contributions to the safety and security of U.S. capital markets. Investors are better protected because of the PCAOB. Audit quality has improved because of the PCAOB.”
She added, “The integrity of our markets is not inevitable. It takes vigilance to guard against negligence, recklessness, and fraud that threaten our system and the people who depend on it. We must never forget those people are why we are here. From workers saving for retirement, to families investing for their futures, to businesses creating jobs because they can raise money through sound, liquid markets—quality audits protect people. At the PCAOB, protecting people drives everything we do.”
As the Financial Times noted on Friday, the regulator has imposed record fines on audit firms under Williams’ tenure and faced criticism from some in the accounting profession that it has focused unfairly on minor infractions.
“Now, the firms are upset that the PCAOB has inspected them and found very significant problems. The firms try to say all those are not big deals. You know, they say the PCAOB is nickel and diming them to death. But that’s not true,” Lynn Turner, a former SEC chief accountant, told the publication Corporate Crime Reporter in a recent interview.
The SEC requested to add $100 million to its fiscal 2026 budget if it were to be required to take on the PCAOB’s work, SEC Chair Paul Atkins said at a House hearing in May, adding he would likely seek additional funds, the Wall Street Journal reported.
The PCAOB isn’t out of the woods just yet. Lawmakers could reintroduce the proposal at some point, the WSJ noted, and the SEC, led by Atkins who is a longtime critic of the PCAOB, could also decide to remove the board members as it has done in recent years.
[CPA Practice Advisor]
