Join 250,000+
professionals today

Add Insights to your inbox - get the latest
professional news for free.

AICPA Urges SEC to Halt PCAOB’s New Audit Metrics

Join our 250K+ subscribers

Join our 250K+ subscribers

Subscribe

26 DEC 2024 / AICPA UPDATES

AICPA Urges SEC to Halt PCAOB’s New Audit Metrics

AICPA Urges SEC to Halt PCAOB’s New Audit Metrics

Looks like we’ve got a classic standoff brewing in the world of accounting. The American Institute of CPAs (AICPA) is taking a hard pass on the Public Company Accounting Oversight Board’s (PCAOB) new Firm and Engagement Metrics and Firm Reporting rule, and they’re not holding back. In a letter to the Securities and Exchange Commission (SEC), the AICPA made it clear: these rules are not favorable news for micro audit firms and the companies that depend on them. So, what’s the deal with these rules, and why’s the AICPA sounding the alarm?

The Fine Print on PCAOB’s New Rules

The PCAOB’s latest regulations, approved in November 2024, require registered audit firms to spill the beans on firm-level and engagement-specific metrics. These aren’t just for any company, though—they’re targeting accelerated filers (public float of $75–$700 million) and large accelerated filers (float over $700 million).

Here’s what the PCAOB wants to know:

  • Who’s doing the work: Hours logged in by partners, managers, and staff.
  • How hard they’re working: Average weekly hours across engagements.
  • How trained they are: Annual training hours for audit personnel.
  • Experience in the field: Industry expertise at the firm and engagement levels.
  • Who’s sticking around: Retention rates for senior staff.
  • Timing of the work: How much of the audit gets done before and after year-end.
  • Restatements: How often audited financials need fixing later.

Sounds like a lot, right? The PCAOB insists these metrics will boost transparency and improve audit outcomes. PCAOB Chair Erica Williams recently highlighted audit quality among the largest firms, with Big Four deficiency rates holding steady at 26% in 2023, a marked improvement from previous years. While this shows progress for large firms, the AICPA argues that micro firms lack the resources to meet these requirements, leaving them disproportionately burdened.

Why AICPA Says “No Way”

  • Big Costs: The AICPA argues that these rules hit micro and medium-scale firms hardest, forcing many to ditch public company audits altogether. That’s bad news for competition and even worse for emerging companies trying to meet audit requirements to access U.S. capital markets.
  • Less Choice: Fewer audit firms mean fewer options. For micro and mid-sized companies, this could mean higher audit fees and less favorable terms.
  • Scaling Isn’t Easy: The PCAOB assumes larger firms can swoop in and pick up the slack, but scaling up isn’t as simple as it sounds. The AICPA points out that integrating new clients takes serious resources, and larger firms might struggle to handle the extra load without straining existing relationships.
  • Unfair Standard: As PCAOB Chair Williams recently noted, “significant improvements” in the Big Four’s audit quality suggest existing regulations are driving change at the top. Yet, applying these stringent metrics to independent and boutique firms—many of which lack the same resources and create an uneven playing field. The AICPA argues that this could limit competition and make it harder for smaller firms to scale and compete.
  • A Recipe for Over-Regulation: The AICPA thinks these metrics could end up being used as ammunition for PCAOB inspections and enforcement actions. Imagine getting dinged for a tiny mistake in reporting—no fun, right?

The Audit Rules Divide

The AICPA is worried about the domino effect. If these rules go live, micro and mid-sized firms could abandon public company audits, leaving the market dominated by the big players. For developing businesses, that’s a one-two punch, with less choice and higher costs. Meanwhile, the PCAOB argues that these metrics will improve transparency, pointing to recent gains in audit quality at larger firms as proof of their effectiveness. But the AICPA counters that micro firms don’t have the same resources to implement these changes. The cost of compliance, combined with limited infrastructure, makes the playing field anything but level. While larger firms may continue to thrive under these metrics, growing firms' risk being sidelined entirely.

A Fair Game or a Foul?

The AICPA isn’t just complaining—they’re calling for smarter solutions. They’re urging the SEC to hit pause and look for alternatives that improve audit transparency without driving smaller firms out of the market. Their message is clear: transparency matters, but not at the cost of fairness and accessibility. This showdown isn’t just about accounting—it’s about keeping the playing field fair. The AICPA is fighting to ensure these rules don’t tip the scales toward big firms at the expense of smaller players. Whether the SEC listens or not, one thing’s for sure: the outcome will have big implications for the future of auditing and the companies that rely on it. Subscribe to MYCPE ONE Insights for the latest in finance, accounting, and corporate news delivered straight to your inbox.

Until next time…

Don’t forget to share this story on LinkedIn, X and Facebook

📢MYCPE ONE Insights has a newsletter on LinkedIn as well! If you want the sharpest analysis of all accounting and finance news without the jargon, Insights is the place to be! Click Here to Join

Subscribed
Vanessa purchased a subscription.
Subscribed
Matthew purchased a subscription.
Subscribed
Sherry purchased a subscription.
Subscribed
Anita purchased a subscription.
Subscribed
Scotty purchased a subscription.
Subscribed
danny purchased a subscription.
Subscribed
tracy purchased a subscription.
Subscribed
LaKeila W purchased a subscription.
Subscribed
Jason purchased a subscription.
Subscribed
Bhavin purchased a subscription.
Subscribed
Jessica purchased a subscription.
Subscribed
Elizabeth purchased a subscription.
Subscribed
Isa purchased a subscription.
Subscribed
Engin purchased a subscription.
Subscribed
Patrick purchased a subscription.
Subscribed
Pamela purchased a subscription.
Subscribed
Amy purchased a subscription.
Subscribed
Brian purchased a subscription.
Subscribed
Wendi purchased a subscription.
Subscribed
Tracy purchased a subscription.
Subscribed
Mark purchased a subscription.
Subscribed
Mark purchased a subscription.
Subscribed
Julie purchased a subscription.
Subscribed
Pamela purchased a subscription.
Subscribed
Jennifer purchased a subscription.
Subscribed
Scott purchased a subscription.
Subscribed
Allison purchased a subscription.
Subscribed
James purchased a subscription.
Subscribed
SHARON purchased a subscription.
Subscribed
Richard purchased a subscription.
Subscribed
Weiyue purchased a subscription.
Subscribed
Shaniee purchased a subscription.
Subscribed
John purchased a subscription.
Subscribed
Ann purchased a subscription.
Subscribed
Katherine purchased a subscription.
Subscribed
Lauren purchased a subscription.
Subscribed
Catherine purchased a subscription.
Subscribed
Roger purchased a subscription.
Subscribed
Greg purchased a subscription.
Subscribed
Gina purchased a subscription.
Subscribed
Betsey Mar purchased a subscription.
Subscribed
Amy purchased a subscription.
Subscribed
Olamide purchased a subscription.
Subscribed
Elizabeth purchased a subscription.
Subscribed
Denise purchased a subscription.
Subscribed
Patrick purchased a subscription.
Subscribed
Jeff purchased a subscription.
Subscribed
William purchased a subscription.
Subscribed
Laurie purchased a subscription.
Subscribed
JEROME purchased a subscription.
Subscribed
Alannah purchased a subscription.
Subscribed
MARSHA purchased a subscription.
Subscribed
Martha purchased a subscription.
Subscribed
Brigit purchased a subscription.
Subscribed
Keith purchased a subscription.
Subscribed
Dan purchased a subscription.
Subscribed
Mel purchased a subscription.
Subscribed
Rebecca purchased a subscription.
Subscribed
William purchased a subscription.
Subscribed
AKSHAT purchased a subscription.
Subscribed
Arvida purchased a subscription.
Subscribed
ALEKSANDRA purchased a subscription.
Subscribed
Nathan purchased a subscription.
Subscribed
Carol purchased a subscription.
Subscribed
William purchased a subscription.
Subscribed
Gail R purchased a subscription.
Subscribed
Christy purchased a subscription.
Subscribed
Dave purchased a subscription.
Subscribed
Marcella purchased a subscription.
Subscribed
Theresa purchased a subscription.
Subscribed
Pauline purchased a subscription.
Subscribed
Michael purchased a subscription.
Subscribed
Mark purchased a subscription.
Subscribed
Brittany purchased a subscription.
Subscribed
Scott purchased a subscription.
Subscribed
David purchased a subscription.
Subscribed
Vandana purchased a subscription.
Subscribed
Jose purchased a subscription.
Subscribed
Vasyl purchased a subscription.
Subscribed
Channy purchased a subscription.
Subscribed
Kimberly purchased a subscription.
Subscribed
Kathleen purchased a subscription.
Subscribed
Gary purchased a subscription.
Subscribed
Miranda purchased a subscription.
Subscribed
Bryan purchased a subscription.
Subscribed
SU YOUNG purchased a subscription.
Subscribed
Jeannene purchased a subscription.
Subscribed
Abiola purchased a subscription.
Subscribed
Margaret purchased a subscription.
Subscribed
Christine purchased a subscription.
Subscribed
Micah purchased a subscription.
Subscribed
Kevin purchased a subscription.
Subscribed
Lauren purchased a subscription.
Subscribed
Silver purchased a subscription.
Subscribed
Lin purchased a subscription.
Subscribed
Brooksher purchased a subscription.
Subscribed
Sandra purchased a subscription.
Subscribed
Stephen purchased a subscription.
Subscribed
Gary purchased a subscription.
Subscribed
Nicole purchased a subscription.