Folding the PCAOB into the SEC Will Weaken Audit Oversight, Not Strengthen It

Senator Scott,

As a fellow South Carolinian, a proud graduate of the University of South Carolina, and someone who had his first audit failure just down the road from where you grew up, I’m writing with deep concern about your proposal to eliminate the Public Company Accounting Oversight Board (PCAOB) and fold its responsibilities into the Securities and Exchange Commission.

My first audit failure—one I’ll never forget—was at the South Carolina Farm Bureau Export Elevator in 1976. That experience taught me the weight and responsibility we carry as auditors. Since then, I’ve watched the evolution of audit regulation with the perspective only decades in the field can give. The PCAOB is far from perfect—but dissolving it into the SEC would not fix what’s broken. It would make things worse.Let me explain why.

Folding the PCAOB Into the SEC Will Undermine Oversight

The SEC Is Not Built for Specialized Audit Oversight- The PCAOB has a singular mission: inspect, regulate, and improve the audits of public companies.- The SEC’s mandate is far broader. It does not have the financial audit expertise or structural independence to fulfill this role at the same standard.- Worse, if PCAOB staff are moved to federal pay scales, we will lose the experienced, technically trained professionals we need most. Audit quality will suffer, full stop.

The Real Problems with the PCAOB—And How to Fix Them

Not One PCAOB Board Member Has Been an Audit Partner- This is the biggest blind spot in PCAOB governance. How can you regulate what you’ve never practiced?- The board’s lack of experience results in unrealistic expectations, tone-deaf standard-setting, and inspections that often miss the forest for the trees.

Chronic Staff Turnover- The PCAOB bleeds talent. It’s hard to maintain consistent standards when inspectors are learning on the job.- This leads to inconsistent inspections, conflicting guidance, and erosion of trust with the firms they're regulating.

Inspectors Are Reviewing Workpapers for Industries They Don’t Understand- I've seen inspectors with zero experience in banking reviewing complex financial services audits.- This mismatch leads to bad assumptions and irrelevant findings—and does nothing to improve audit quality.

No Use of AI or Modern Technology- In 2025, the PCAOB still doesn't use AI to review workpapers. Everything is locked down “for risk.”- While audit firms are adopting advanced analytics and automation, the regulator remains stuck in manual mode. That’s not forward-looking oversight—it’s inefficient and outdated.

No Quality Control Guidance or Grading of Findings- The PCAOB doesn’t provide firms with a framework for proactive quality control.- Worse, their inspection reports don’t label issues as inconsequential, significant, or material. Every finding reads like a disaster—even when it's a low-level process issue.

No Use of the 80/15/5 Rule- In quality control, we know that 80% of issues are low-risk noise, 15% need process tweaks, and 5% are serious.- The PCAOB treats every finding as equally important. That makes it impossible for firms to prioritize what matters most.

Let’s Talk About Cost

You’ve cited a projected $771 million in savings. But here's what many may not realize: not a single tax dollar currently funds the PCAOB. It’s paid for by fees from public companies and audit firms. Moving it to the SEC just shifts the cost into the federal budget. That's not savings—it's accounting smoke and mirrors.

What Needs to Happen Instead

Instead of folding the PCAOB into the SEC, let’s strengthen it:- Appoint experienced audit partners to the board.- Improve retention by creating career paths that value technical expertise.- Use AI and data analytics in inspections.- Provide clear, tiered guidance in inspection reports.- Invest in industry-aligned training for inspectors.These are reforms that will actually protect investors and improve audit quality—not weaken it.

From One South Carolinian to Another

Senator Scott, I’ve seen what happens when audit oversight fails. I’ve lived it. And I know that independence, specialization, and practical experience are not luxuries—they are necessities.Please reconsider your support for this proposal. Let’s work together to fix what’s broken in the PCAOB—not bury it under the bureaucracy of the SEC.

Sincerely,

John C. Blackshire, Jr. Retired CPA

A Proud Gamecock and Veteran A

uditor