backRecent reporting and official job postings have made clear that the SEC is forming a new group within its Division of Enforcement to focus on investigating and enforcing violations by audit firms and their professionals. According to recent job postings, the new “SOX Group will investigate and litigate matters involving potential violations of auditing and related professional standards and provisions of the Sarbanes-Oxley Act and other relevant federal securities laws.” The new group will report to the Chief Accountant for the Division of Enforcement. With the SEC currently seeking to hire supervisory and trial positions in this new group, we expect the group will grow to comprise a larger number of attorneys and accountants than the SEC currently has dedicated to auditor enforcement matters, and may come to include some current PCAOB enforcement staff.1Absent public comment by the SEC on the SOX group, future job postings may provide significant information with respect to whether the SOX group will “staff up” with new outside hires, bring over current PCAOB enforcement employees, or reallocate the responsibilities of existing SEC staff. We note that the positions’ Minimum Qualification Requirements include “conducting investigations or litigation and making recommendations for action,” which suggest the SEC is seeking to hire current and former SEC or PCAOB employees to fill the roles.
In this note, we discuss the potential ramifications of a dedicated SEC enforcement group focused primarily on auditor liability, including (1) whether auditors can expect increased SEC scrutiny; (2) what it will mean for PCAOB auditor enforcement; and (3) what are implications if the SEC leads the way in auditor enforcement as opposed to the PCAOB.
Increased SEC auditor enforcement?
We expect the formation of this new SOX group will increase SEC investigations into auditor misconduct. Although the SEC has historically had the ability to bring actions for auditors’ violations of the federal securities laws and to discipline auditors for violations of auditing and related standards, in recent years, its enforcement activity against auditors has lagged far behind the PCAOB. Since the beginning of calendar year 2021, the SEC has brought 50 standalone enforcement actions against auditors, while the PCAOB has brought nearly four times as many matters. And in the past two years, the SEC has settled only nine audit misconduct matters.2Brattle Group, 2025 Enforcement Activity Involving Auditors. SEC & PCAOB Enforcement Actions brought Against Public Accounting Firms & Associated Individuals, Feb. 2026, available here Although some of the SEC’s historical auditor enforcement actions have charged failures to comply with professional standards, many of the SEC’s actions in recent years have focused on more egregious and less technical auditor conduct, such as complicity in alleged corporate wrongdoing or near total abdication of professional responsibility.3See, e.g., SEC v. Olayinka Temitope Oyebola and Olayinka Oyebola & Co. (Chartered Accountants), No. 24-cv-7376 (S.D.N.Y. Sept. 30, 2024) (alleging that a Nigerian accountant and his PCAOB-registered firm aided and abetted a multi-year securities fraud scheme perpetrated by Mmobuosi Odogwu Banye and three related U.S. companies that Mmobuosi controlled); see also SEC v. Prager Metis CPAs, LLC, and PragerMetis CPAs LLP, No. 1:23-cv- 23723 (S.D. Fla. Sep. 29, 2023) (alleging that defendants, a registered public accounting firm and its California professional services affiliate, violated auditor independence rules under Rule 2-01(b) of Regulation S-X and aided and abetted their clients’ violations of federal securities laws).
Once the SOX group dedicated to auditor enforcement matters is fully staffed and operating, auditors can expect increased scrutiny from SEC enforcement as compared to the last few years. We expect the group’s focused mandate will lead to an increased number of investigations as the SOX group’s staff seeks to demonstrate its worth and fulfill its mandate. We also expect that in matters where the SEC historically might have deferred to the PCAOB to investigate potential auditor misconduct, the new SOX unit will now take the lead.
Under current SEC leadership, however, it seems unlikely that the new group will significantly expand the types of investigations and matters that the SEC pursues. Indeed, from Chairman Paul Atkins down, the SEC has repeatedly emphasized a “back to basics” theme for its enforcement program, with an emphasis on pursuing fraud actions against those who “lie, cheat, or steal” and only egregious violations of more “technical” provisions. An SEC spokesperson stated that the new group is intended to concentrate on “crack[ing] down on bad actors.”4Reuters, US SEC forming new team to police accounting issues, Mar. 19, 2026, available here Such a focus is a far cry from the previous PCAOB leadership’s mandate to use “every tool in [its] enforcement toolbox” against auditors,5See PCAOB Chair Williams Remarks on 20th Anniversary of Sarbanes-Oxley Act and Establishment of the PCAOB, July 28, 2022, available here which led to numerous enforcement matters having nothing to do with audit deficiencies but instead technical reporting and rules violations.
Thus, the current SEC leadership’s “course correction” away from a focus on the number of enforcement matters, may mean that, despite the likely increase of SEC scrutiny for auditors generally, such scrutiny is more likely to focus on the worst actors in the profession, and not necessarily professionals at the largest, most sophisticated firms. We expect the SOX group will be unlikely, therefore, to focus on many of the types of matters, including “sweeps” and those related to negligent misconduct or failures to comply with professional standards without a corresponding impact on the financial statements, that PCAOB enforcement brought under its former leadership.
Instead, the new SOX group appears likely to bring cases based on allegations of repeated and egregious violations of the antifraud provisions and auditing standards.6Cf. In the Matter of BF Borgers CPA PC, Release No. 11283 (May 3, 2024) (charging BF Borgers CPA and its owner with violating the antifraud provisions and engaging in improper professional conduct by deliberately and systematically failing to conduct audits and reviews of public company and SEC-registered broker-dealer clients' financial statements in accordance with PCAOB standards, including by falsifying audit workpapers, failing to obtain required engagement quality reviews for at least 1,625 public filings, and issuing audit reports falsely certifying compliance with PCAOB standards. The respondents agreed to settle the matter on a neither admit nor deny basis, and agreed to pay civil penalties and be permanently barred from appearing or practicing before the SEC as accountants). If the priorities of SEC leadership change under future administrations, however, the infrastructure established by the current SEC in building a SOX group dedicated to auditor enforcement could lead to a significant ramp-up of the number and types of investigations the SEC will open against auditors.
It remains to be seen how the SEC will pursue cases against auditors recommended by the new SOX group and what sanctions it may seek for any violations. Post-Jarkesy, the SEC stopped using its in-house administrative proceedings to advance litigated Rule 102(e) matters against accountants for “improper professional conduct.” Indeed, shortly after the Supreme Court’s decision in Jarkesy, the SEC dropped numerous pending Rule 102(e) matters against accountants. However, the SEC recently announced a settled 102(e) proceeding against an individual auditor imposing an industry bar and no penalties.7In the Matter of John Michaels, CPA, Release No. 104241 (Nov. 21, 2025) (ordering, pursuant to a settled administrative proceeding, that respondent John Michaels, a solo-practitioner CPA, cease and desist from violating Rule 2-02 of Regulation S-X and Section 30(g) of the Investment Company Act and barring him from appearing or practicing before the Commission as an accountant, after finding that he lacked auditor independence in one of his audits, and that he further failed to comply with PCAOB standards by not communicating with the predecessor auditor before accepting the engagement, not adequately documenting his audit work, and not obtaining an engagement quality review). Additionally, earlier this year, the SEC announced a settled 102(e) proceeding against an auditing firm imposing compliance with remedial undertakings and a censure, while noting that no civil penalty was imposed based on the firm’s remediation efforts.8In the Matter of EisnerAmper LLP, Release No. 104936 (Mar. 6, 2026). Although a recent district court case upheld the SEC’s ability to obtain industry bars against professionals in administrative proceedings,9See Sztrom v. SEC, No. 24-cv-3548 (D.D.C. Jan. 8, 2026). it is unclear whether the SEC will continue to attempt to use administrative proceedings to adjudicate allegations raised by the new SOX group. As the new job postings include both investigation and litigation-related positions, we expect the result will be a mix of administrative proceedings seeking remedies that do not run afoul of Jarkesy, combined with federal district court actions alleging that auditors violated or aided and abetted violations of the federal securities laws.10The SEC has frequently filed actions in district court alleging that auditors committed primary or secondary violations of the federal laws. See footnote 3 supra.
What happens to PCAOB enforcement?
The impact of the SEC’s new SOX group on continued PCAOB enforcement activity remains unclear. Our expectation, however, is that the SEC’s new SOX group will supplant a substantial portion of the PCAOB’s enforcement program and may hire current PCAOB staff members.
PCAOB enforcement has already taken a steep downturn since the departure of former Chair Erica Williams, and the PCAOB has had no public enforcement matters since the swearing in of new Board Chair Demetrios Logothetis. Additionally, with the departure of the PCAOB’s former Director of the Division of Enforcement and Investigations Robert Rice, the move of other PCAOB enforcement employees to Board staff positions, and other staff departures, the Division’s enforcement staff has shrunk considerably during the past year.
Further, it is unclear whether the PCAOB can currently adjudicate any enforcement allegations recommended by its Enforcement Division. The constitutionality of PCAOB’s enforcement program is currently being challenged in federal court on numerous grounds, including whether its use of in-house administrative proceedings is legal.11See Doe v. PCAOB, No. 1:24-cv-780 (D.D.C.). The PCAOB does not appear to currently have an in-house hearing officer, as its website no longer lists a Chief Hearing Officer on its Senior Staff page.
Despite the new SEC SOX group, diminished PCAOB enforcement staff, and ongoing legal challenges, it is unlikely that PCAOB enforcement against auditors will stop entirely. First, the Sarbanes-Oxley Act requires that the Board “conduct investigations and impose disciplinary proceedings” and “enforce compliance with th[e] Act, the rules of the Board, professional standards, and the securities laws relating to the preparation and issuance of audit report . . . .”12See S-Ox § 101(c)(4), (6). Absent a change in legislation, the Board will need to continue to carry out these duties in some fashion.
Second, although the Board’s enforcement budget declined in 2026, the budget continues to support a robust enforcement program. Presumably, the SEC did not approve significant budget for a Division that it intends to do nothing. Both recent comments from the SEC’s Chief Accountant and the recently-revised SEC Enforcement Manual suggest that the SEC continues to see a role for PCAOB enforcement. 13SEC Chief Accountant Kurt Hohl’s comments at PLI’s annual “SEC Speaks” conference referenced addressing the length of time it took for PCAOB enforcement actions, but did not suggest the end of PCAOB enforcement. See also SEC Enforcement Manual, Feb. 24, 2026, §§ 5.6.3 “Referrals to the Public Company Accounting Oversight Board” & 2.1.2.2 “Referrals from the Public Company Accounting Oversight Board.”
Third, PCAOB enforcement has certain built-in advantages in investigating auditors over the SEC. Most significantly, the PCAOB has negotiated cooperative agreements with foreign audit regulators that permit the PCAOB to obtain access necessary to investigate auditors in those jurisdictions that participate in audits of U.S. filers. The SEC does not have agreements that provide it with the same access to investigate foreign auditors.14The SEC Cooperative Agreements with Foreign regulators are available here; the list of PCAOB Cooperative Arrangements with Non-U.S. Regulators are available here. Significantly, the PCAOB has successfully investigated, including by taking testimony, China-based auditors and audit firms. Without a similar agreement with Chinese authorities, the SEC would have difficulty obtaining similar access to undertake such investigations. The PCAOB may also have advantages in enforcing cooperation with its own inspections program under PCAOB Rule 4006.15Many PCAOB enforcement matters have involved violations of Rule 4006 for failing to cooperate with a PCAOB inspection, while the SEC has rarely brought such cases. See, e.g., In the Matter of Raines & Fischer LLP, Release No. 105-2024-049 (Dec. 3, 2024); see also In the Matter of Natalie Murphy, CPA, Release No. 105-2025-006 (Feb. 25, 2025).
Thus, although the new SEC SOX group is likely to displace a significant amount of the PCAOB’s enforcement activity, we expect the PCAOB will maintain an enforcement function with a greater focus on foreign auditor enforcement and compliance with its own inspections program. If true, such a program focus would provide a tangible, non-duplicative complement to the SEC’s new SOX group.
Implications for Auditors
The shift from the PCAOB being the primary enforcer of auditor misconduct to the SEC will have significant consequences for auditors. Some of these changes may be positive for auditors, including an expected SEC focus on enforcing only clearcut and egregious violations, rather than those that are more technical in nature. And even a fully-staffed SEC SOX group likely will result in fewer resources dedicated to investigating potential auditor misconduct than a fully-staffed PCAOB Enforcement Division.
On the other hand, SEC investigations and proceedings against auditors are not subject to the confidentiality provisions of Section 105 of the Sarbanes-Oxley Act. Under this provision, PCAOB investigations and inspections and all documents prepared in connection with those investigations and inspections, including testimony transcripts:
shall be confidential and privileged as an evidentiary matter (and shall not be subject to civil discovery or other legal process) in any proceeding in any Federal or State court or administrative agency, and shall be exempt from disclosure, in the hands of an agency or establishment of the Federal Government, under the Freedom of Information Act (5 U.S.C. 552a), or otherwise, unless and until presented in connection with a public proceeding…. 16See S-Ox § 105(b)(5)(A).
SEC investigations into auditor misconduct are not afforded similar confidentiality. As a result, civil litigants may be able to obtain documents prepared in connection with SEC investigations and transcripts of witness testimony will likewise be discoverable.
Another significant change will be that more enforcement matters against auditors will become public. PCAOB disciplinary proceedings are non-public under section 105(c) of the Act. But adjudications of SEC cases against auditors are public, either in federal district court or through public administrative proceedings.
Further, with adjudications of auditor misconduct brought by the SEC instead of the PCAOB, auditors will lose one level of appeal. Currently, auditors can contest PCAOB allegations through a PCAOB hearing, appeal to the Board, and then appeal to the Commission. The existing PCAOB process provides auditors with substantive and procedural benefits. It typically takes more than a year from a hearing officer decision to a Board appeal decision and then more than another year to a Commission decision. Having the SEC bring the case in the first instance will likely cut at least a year off the process and give auditors one less chance to prevail on the merits.
Finally, we expect that a dedicated SOX group within SEC enforcement likely will lead to more investigations of public issuers’ accounting as well. The limited language from job postings is certainly not restricted to auditor conduct and references “provisions of the Sarbanes-Oxley Act and other relevant federal securities laws.” Investigations that start as auditor-only investigations could easily expand into issuer investigations, and we expect there will be investigations by the SOX group in which auditor conduct is secondary to concerns regarding the underlying public issuer’s accounting and disclosures. Because the SEC has direct subpoena power, the SOX group will likely exercise that power to obtain documents and testimony from not just auditors, but also issuers. Although the Act currently provides that the PCAOB can seek SEC subpoenas to obtain issuer documentation, the Board has never promulgated rules to do so, and consequently the PCAOB enforcement staff does not have the authority to compel productions from issuers in Board investigations.
Key Takeaways
We expect the new SOX group to increase SEC enforcement focus on auditors and public issuers. Under current SEC leadership, that focus may fall more principally on the worst of the profession, and not on the largest, most sophisticated audit firms or on the types of more technical cases, including sweeps, more recently brought by the PCAOB. Under future SEC leadership with different priorities, however, the SOX group could expand its mandate and substantially escalate enforcement efforts against auditors.
We also expect that the new group will assume much of the PCAOB enforcement’s duties but will not entirely displace the PCAOB’s enforcement program. As part of its mandate under the Act, the PCAOB will likely continue with certain enforcement priorities, including investigations of foreign firms and auditors that participate in audits of US filers, as well as non-compliance with the PCAOB’s inspections program.
A significant shift from PCAOB enforcement to SEC enforcement likely will have certain benefits for auditors, including a focus on more clearcut, egregious conduct rather than more technical violations. Such a shift also could have potentially negative consequences for auditors, however, including losing the confidentiality afforded to PCAOB investigations, public disclosure of enforcement proceedings, and fewer opportunities to appeal negative findings.
Additional Contacts: Michael Pauze, Carmen Lawrence, Bill Johnson, Gary Adamson, Emmett Murphy, Rich Marooney, Lisa Bugni, Sophia Luby, and Kevin O’Brien
