Congress is considering eliminating the Public Company Accounting Oversight Board, the independent federal agency that “audits the auditors.” Karthik Ramanna and Nemit Shroff write that elimination of the PCAOB would be a strategic blunder that would undercut President Donald Trump’s own industrial policy and trade initiatives.
Tucked into the latest House reconciliation bill is a stealth proposal to eliminate the Public Company Accounting Oversight Board (PCAOB) and fold its work into the Securities and Exchange Commission (SEC). It may sound at first like bureaucratic belt-tightening. In reality, it’s a strategic blunder—one that could weaken American oversight in China, compromise financial transparency, and undercut the United States’s global leadership position.
The PCAOB may not be widely known, but its role is vital. Created in 2002 after the Enron and WorldCom scandals, it serves as the world’s de facto “auditor of auditors.” Its mission is to ensure that public companies listed on U.S. exchanges are subject to rigorous and independent auditing. That mission increasingly has global reach, with the PCAOB operating in more than 50 jurisdictions—including, crucially, the People’s Republic of China.
In 2022, the PCAOB became the only audit regulator in the world granted inspection access to audit firms in mainland China and Hong Kong under terms consistent with U.S. law. This breakthrough followed the Holding Foreign Companies Accountable Act (HFCAA), passed overwhelmingly by Congress in 2020 and signed by President Donald Trump. That law mandated that companies be delisted from U.S. exchanges if American inspectors were continually denied oversight access. Facing this pressure, Chinese authorities agreed to a narrow but meaningful concession: access for the PCAOB—not for the SEC or any other U.S. agency.
Why the PCAOB? Because it’s not technically a government agency. It’s a nonprofit entity created by Congress but structurally distinct from the federal government. That status gave Beijing room to agree to inspections without ceding sovereignty. If the PCAOB were dissolved and its functions moved inside the SEC, that hard-won deal would almost certainly collapse.
China is unlikely to accept new terms with a U.S. government agency—and for good reason. What Beijing tolerates from a nonprofit-status regulator, it will likely firmly reject from a direct arm of the U.S. government, particularly amid rising geopolitical tension. The PCAOB’s independent status wasn’t a technicality; it was the keystone that made the deal work.
And the risks don’t end in China. The PCAOB’s inspection agreements around the world are likewise predicated on its non-governmental status. Dismantling the PCAOB would void these deals, reducing U.S. visibility into the finances of foreign companies that operate in U.S. markets or play critical roles in global supply chains.
This kind of visibility is no luxury, especially now. As the U.S. moves toward more assertive industrial policy, especially in artificial intelligence, clean energy, and semiconductors, regulators need tools to confirm compliance with Buy America rules, reshoring incentives, and tariff laws. While the PCAOB doesn’t enforce trade rules, its inspections can expose red flags—misreported sourcing, transshipped goods, or claims of U.S.-based production that don’t hold up under scrutiny.
Audit oversight strengthens U.S. enforcement efforts and helps deter fraud. It also supports the broader integrity of U.S. markets, a reputation that underpins the dollar’s primacy. And the PCAOB is remarkably cost-effective. The collapses of companies such as Enron led to over $300 billion in investor losses, which dwarfs the PCAOB’s annual budget, under $400 million in recent years. Notably, since the PCAOB’s establishment in 2002, we have seen no major accounting failure amongst companies under its continued watch. In fact, the serious accounting failures have been in private companies like FTX, where the PCAOB has no jurisdiction, and in companies that were to come under PCAOB scrutiny (such as WeWork, about to go public), a sign of the PCAOB’s effectiveness. The lesson is clear: fraud festers where auditors go unaudited.
Some critics argue that the PCAOB lacks accountability. But the PCAOB is hardly unmoored: its members serve at the SEC’s pleasure, its budget must be approved annually by the SEC, and its constitutional status has withstood Supreme Court scrutiny—notably by a conservative majority of justices. The government must think carefully before unraveling a structure that works. The PCAOB is a rare bipartisan success story—an oversight body that serves American investors. Eliminating the PCAOB would mean surrendering one of America’s few tools for holding powerful foreign firms to our standards. That’s not streamlining. It’s a strategic error.
Authors’ Disclosures: Karthik Ramanna, Ph.D., is Professor of Business and Public Policy at the University of Oxford and formerly served as an advisor to the PCAOB. Nemit Shroff, Ph.D., is Distinguished Professor of Accounting at the Massachusetts Institute of Technology and an advisor to the PCAOB. The authors report no other conflicts of interest. You can read our disclosure policy here.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
