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PCAOB Enforcement Activities in 2024 Hit Record Highs

The Public Company Accounting Oversight Board (PCAOB) has concluded that its enforcement activities in 2024 reached their highest level since 2017, as reported by Cornerstone Research. This surge signifies the PCAOB's commitment to upholding auditing standards, particularly evident in the final year of the Biden administration.

The report titled "PCAOB Enforcement Activity—2024 Year in Review" reveals that the PCAOB publicly disclosed a total of 51 enforcement actions, with a significant number — 40 — being related to auditing practices. Notably, the majority of these actions occurred within the first half of the year, highlighting a proactive approach from the PCAOB amidst evolving legal interpretations following the U.S. Supreme Court's decision in SEC v. Jarkesy.

Monetary penalties imposed by the PCAOB also reached unprecedented levels in 2024, with total penalties soaring to $35.7 million. This indicates a staggering 78% increase from 2023, illustrating that nearly 40% of all penalties levied since the PCAOB's establishment have occurred in the last year.

Jean-Philippe Poissant, a contributor to the report, expressed that this aggressive enforcement was unequaled, with 30 Auditing Actions finalized in the first half of 2024 alone — more than tripling the actions from the previous year. The report noted that violations extended beyond standard auditing procedures, with significant breaches in Quality Control Standards and Ethics and Independence identified in these actions.

A comparative analysis of PCAOB enforcement throughout the Biden administration (from January 20, 2021, to December 31, 2024) versus the initial Trump administration (January 20, 2017, to January 19, 2021) indicates a profound shift. Under Biden, enforcement actions totaled 160, encompassing 124 auditing actions, while the first Trump administration recorded 126 actions and only 101 auditing-related actions. Remarkably, the total fines during the Biden years amounted to nearly $68 million, a stark contrast to just over $10 million under Trump.

Reflecting on the shift in the nature of respondents, the report illustrates a transition from primarily individual respondents under the Trump administration to a much more balanced mix of individual and firm respondents during Biden’s tenure. Furthermore, there was a notable increase in fines, with around 94% of respondents fined in auditing actions, compared to only 59% during the previous administration.

As the PCAOB marks 2024 as the 20th year since its first enforcement action, the organization has finalized a cumulative total of 487 enforcement actions affecting 675 respondents. Of these, the majority (344) were individual auditors, highlighting the PCAOB's ongoing scrutiny of individual versus firm accountability. Since its inception, the cumulative penalties imposed by the PCAOB have reached $94 million, reinforcing its role in ensuring compliance and safeguarding the integrity of financial reporting.

Several key trends have emerged from the 2024 report. The number of Auditing Actions aimed at U.S. respondents rose, while instances involving non-U.S. respondents remained steady. For the first time since 2021, there were complaints referring to a company's declaration of material weaknesses in their internal controls. Moreover, over half of the adjudicated Auditing Actions in 2024 (52%) involved alleged breaches of the Quality Control Standards, indicating a focused area of enforcement.

Overall, the PCAOB's aggressive enforcement in 2024 underscores its commitment to maintaining high auditing standards and reflects the evolving landscape of regulatory oversight in financial reporting. With heightened scrutiny and increased penalties, the PCAOB is clearly setting a precedent for ethical compliance and accountability in the auditing profession.