Recently, both the SEC’s Deputy Chief Accountant, Michal Dusza, and the Acting Chief Counsel, Shehzad Niazi, in the Office of Chief Accountant, publicly discussed the process for PCAOB-registered accounting firms to challenge PCAOB inspection findings to the SEC.⁴ Although they acknowledged the arbitrary and capricious standard for appeal is a “high hurdle,” with recent changes to SEC and PCAOB leadership guiding a clear shift in the oversight environment for registered firms, there has never been a better time for firms to successfully challenge PCAOB inspection findings.

Although PCAOB-registered firms may have historically been reluctant to challenge the PCAOB, under the current regulatory environment, there is a uniquely favorable climate to challenge findings stemming from the old inspection paradigm. Indeed, the regulators themselves may be signaling that in recent years the Division of Registration and Inspections (“Inspections”) overstepped in issuing rigid engagement-specific comments, rather than focusing on true threats to audit quality. Given the shifting regulatory landscape, firms should consider challenging unnecessarily aggressive inspection findings through the mechanisms provided by the Sarbanes-Oxley Act (the “Act”) and related rules.

The Process for Challenging Inspection Findings

The PCAOB inspection process provides two opportunities for a firm to challenge inspection report findings—first to the Board and then to the Commission.⁵ First, once a firm receives the draft inspection report, it has 30 days to submit a response letter to the Board challenging the staff’s conclusions.⁶ A firm can disagree with any of the findings raised in the draft report, including Part I findings,⁷ which become public in the Board’s final report, and Part II observations concerning a firm’s system of quality control, which remain non-public unless the firm does not sufficiently remediate the criticisms within 12 months of the report.⁸ The Board, after reviewing disagreements with the draft inspection report, can revise the report to reflect any changes it believes appropriate.⁹ Because the Board has plenary authority to change any staff inspection finding, a firm can disagree with inspection findings for any reason, including both factual mistakes and aggressive interpretations of standards. To preserve the ability to challenge the Board’s findings to the SEC, firms must first disagree with the staff’s findings in writing to the Board.¹⁰

Second, once the Board issues its final inspection report, a firm may seek SEC review of the Board’s findings. Under the Act and Rule 140 of Regulation P, a firm may request interim Commission review of a Part I or Part II finding within 30 days after it is provided a copy of the final inspection report.¹¹ To request interim Commission review of an inspection finding, the firm must (1) have disagreed to the PCAOB in writing with the substance of a draft inspection report finding and continue to disagree with the finding in the final inspection report or (2) disagree with a finding in a final inspection report that was not included in the draft inspection report.¹² The request for review must succinctly address the specific assessments or determinations that the firm seeks to challenge. Importantly, a timely request for review stays the publication of the portions of the firm’s final inspection report subject to the request for review, unless the Commission determines otherwise.¹³

The Commission will notify the firm and the PCAOB within 30 days of the request for interim review as to whether it is granting the request to consider the matter on the merits.¹⁴ If the Commission grants review, the PCAOB has 15 days to respond.¹⁵ After the PCAOB’s response, the Commission may request additional information from the PCAOB, the firm, or both. While publication of the full unredacted inspection report is stayed during the review, the PCAOB will publish the report with redactions to the portions of the report at issue in the request for interim review. The Commission’s standard for rejecting or modifying a Board finding is whether that finding is “arbitrary and capricious, or otherwise not consistent” with the Act.¹⁶ The Commission, absent good cause, has 75 days after granting a request for review to render a decision.¹⁷

In addition to challenging an inspection finding, firms may also challenge the Board’s determination regarding the sufficiency of a firm’s remediation of a Part II quality control criticism.¹⁸ As discussed above, a Part II observation relates to a firm’s system of quality control and remains a non-public criticism unless the Board deems that a firm failed to sufficiently remediate within 12 months. To seek review of the Board’s determination that the firm failed to sufficiently remediate, the firm must request interim Commission review within 30 days of being notified of the Board’s determination.¹⁹ After the expiration of the time to seek interim review, the Board publishes any unremediated criticisms that are not subject to the interim review.²⁰ 

The Time to Challenge is Ripe

Given that SEC and PCAOB leadership have expressed an openness to a less aggressive PCAOB inspections process, now may be an opportune time for firms to consider challenging PCAOB inspections findings. Indeed, SEC Chief Accountant Kurt Hohl has noted that OCA will encourage the PCAOB “to consider whether inspection reports are providing meaningful information to stakeholders”²¹ and to consider modifications to focus inspections on firms’ systems of quality management. Likewise, PCAOB Chair Logothetis has expressed a desire to modernize the PCAOB’s inspection program and ground it in QC 1000.²² As the new Board settles in, and the staff performing inspections remain largely the same, there may be instances where challenging inspection findings will find a favorable audience with the Board or, if necessary, with the Commission. The same is true with any negative remediation determinations by the Board; this Commission may be more apt to act favorably on a firm’s position that the PCAOB and its staff failed to appropriately consider its remedial actions to address Part II inspection findings.

While the standard of review has not changed, the statements from Commission personnel concerning revamping PCAOB inspections suggest that the Commission will be more likely to find challenges to inspection findings to be meritorious. Indeed, there has been an uptick in challenges to Part I inspection findings in recent years.²³ For example, several 2024 and 2025 inspection reports include language that states “Redacted pending resolution of Firm’s request for SEC review pursuant to 17 C.F.R. 202.140.”²⁴

In the past, the PCAOB has re-released previously redacted inspection reports with redactions removed,²⁵ which could mean that the Commission did not object to the PCAOB’s determination or instructed the PCAOB to revise the findings before publication.²⁶ Recently, however, the PCAOB reissued a December 22, 2025 report changing the redaction language to state “[r]edacted pursuant to 17 C.F.R. 202.140.”²⁷ Such a change suggests that the firm was successful in its request for interim review.

Notably, however, the PCAOB has not reissued at least one redacted report. Specifically, a September 11, 2025 inspection report, which was initially issued with redactions, has not been reissued without redactions.²⁸ It is unclear why the September 11, 2025 report has not been re-released with updated redaction language. While it is possible that the request for interim review is still pending, the review timeline suggests that the SEC completed the review and decided in favor of the firm.²⁹ If so, rather than update the report to eliminate any evidence of the prior redacted language, the PCAOB has seemingly decided to keep the original redacted version. If that is the case, the Board is giving the misleading impression that the SEC review is still pending and that it could still win.

Given the lack of clarity and potentially inconsistent practice by the PCAOB, firms seeking interim review should consider including in their request for relief that the Commission order the PCAOB to remove references to redacted content so that anyone reviewing inspection reports will not be aware of the existence of an additional inspection finding that was removed by order of the Commission. Removing references to the rejected inspection finding will reduce the risk that the firm may be asked to disclose the nature of the original finding by clients, potential clients, or third parties.

Although challenging PCAOB inspection findings and remediation determinations can be an opaque endeavor, sophisticated counsel with a deep understanding of the PCAOB, the inspection process, and the SEC interim review process can help firms navigate its complexities. King & Spalding’s professional liability practice group has robust experience representing accounting firms before the SEC and PCAOB and a comprehensive understanding of both the inspection process and the interim review process.