The proposal, part of a broader deregulatory agenda linked to US President Donald Trump, was introduced by the House Committee on Financial Services leadership.

Under the draft legislation, the PCAOB’s responsibilities for overseeing audit standards and inspecting firms auditing US public companies would be transferred to the Securities and Exchange Commission (SEC). The specific levy funding the PCAOB would also be eliminated, Financial Times reports.

The move comes amid tensions between the PCAOB, under its current chair Erica Williams known for stricter enforcement and record fines, and the accounting firms it regulates. However, eliminating the body may face resistance from Democrats and potentially lack full support from the audit industry itself. The Center for Audit Quality, representing large firms, emphasised the ongoing need for accountability and high audit standards, regardless of the oversight model.

Critics, including investor bodies like the CFA Institute, warn that abolishing the independent regulator could disrupt the inspection regime, potentially lower audit quality, and harm capital markets. Concerns were also raised about potential pay cuts for PCAOB staff transferring to the SEC, although one board member contested the impact on attracting talent.

The legislative proposal also includes cuts to a green housing programme under the Inflation Reduction Act and slashes the budget for the Consumer Financial Protection Bureau. The entire package faces significant procedural hurdles and negotiations within Congress before it could become law.