Stay informed with free updates
Simply sign up to the US financial regulation myFT Digest — delivered directly to your inbox.
The US audit regulator is considering deep cuts to the number of staff inspecting accounting firms, in a downsizing of the Enron-era watchdog designed to align it with Trump administration priorities.
The Public Company Accounting Oversight Board is also examining cuts to its enforcement division and other restructuring options as it takes a less confrontational approach to its dealings with audit firms, according to people familiar with the matter.
The Securities and Exchange Commission, which oversees the PCAOB and is chaired by Paul Atkins, a longtime critic, is pushing for an overhaul of the organisation beginning next year with a shake-up of how it inspects audit firms.
The SEC must approve the PCAOB’s budget for 2027 before the end of this year and the audit regulator was preparing to present the SEC with a proposal that includes cuts to staff numbers, in part to free up money to invest in technology, according to people familiar with internal conversations.
“The SEC is pressing pretty hard,” said one person. “It’s more than we are used to at a granular level from the SEC.”
Jim Logothetis, who was appointed by the SEC in December to lead the PCAOB, told the FT it was “premature” to conclude that there would be cuts, as the budgetary process was in its early stages. The PCAOB declined further comment.
Senior managers had been told to draw up options for downsizing their divisions, the people said, and the PCAOB had also engaged the consulting firm Alvarez & Marsal to review its structure before the submission to the SEC in the summer.
One option under discussion would substantially reduce the number of people in audit inspections, the people said. The proposal could still face internal resistance and would have to be endorsed by the full PCAOB board before submission.
As of December, the organisation employed over 500 people to examine audits of US public companies and report on the quality of accounting firms’ work, a core part of the mandate given by Congress when it was created in the wake of the Enron scandal 25 years ago.
Under its new strategy, the PCAOB will focus less on inspecting particular audits and more on grading accounting firms’ overall systems of quality control.
Logothetis, a 40-year veteran of the Big Four firm EY, has argued this will relieve pressure on individual auditors that he said was driving people from the accounting profession. It would also give the PCAOB information to focus its inspectors instead on high-risk parts of specific audits, he said at an investor forum last month.
People familiar with the planning process said they expected the PCAOB to propose a budget similar in size to 2026 with staffing costs cut in favour of additional investment in technology. The PCAOB’s budget was cut by 9 per cent this year from 2025, and the organisation will have 817 staff by the end of the year, down from 864 in December.
Kurt Hohl, SEC chief accountant, who has responsibility for overseeing the PCAOB, said the organisation had the ability to cut headcount further.
“There’s a lot of top-heavy managers in there, managers supervising managers who are supervising managers,” he told reporters on the sidelines of a Baruch College event last week.
“I don’t have any preconceived notions on numbers or budgets. I’m focused on efficiency and effectiveness . . . Jim’s going to need to spend a lot of money, I think, on emerging technologies. He’s going to need to figure out how to get the right resources to create tools that they can use in their inspection process.”
Hohl argued the PCAOB could also drop parts of its enforcement work that overlap with powers held by the SEC. The SEC is planning to hire a team of lawyers to focus on audit failures, which PCAOB insiders said they expected would be used to justify further cuts to its staff.
