CHICAGO, March 6, 2025 -- According to a new report from The Brattle Group, combined auditor enforcement activity by the Public Company Accounting and Oversight Board (PCAOB) and the US Securities and Exchange Commission (SEC) remained elevated in 2024, continuing a trend of heightened enforcement that began in 2022. However, major legal obstacles – the Supreme Court's June 2024 ruling in SEC v. Jarkesy and multiple ongoing lawsuits challenging the PCAOB's enforcement authority – significantly muted SEC activity and may have been the catalyst for the unprecedented slowdown in PCAOB activity in the second half (H2) of the year.
The report, 2024 Enforcement Activity Involving Auditors: SEC & PCAOB Enforcement Actions Brought Against Public Accounting Firms and Individuals, was authored by a Brattle team led by Principal Alison Forman and Associate Adam Karageorge. A follow-up to Brattle's 2023 Enforcement Activity Involving Auditors and Enforcement Activity Involving Auditors – 2024 Mid-Year Update reports, it analyzes overall enforcement activity from the two regulators, comparing 2024 data to 2022 and 2023 – the first two full years of PCAOB Chair Erica Williams and SEC Chair Gary Gensler's administrations – and to activity during 2018–2021, a proxy for the regulators' prior administrations.
"Though PCAOB and SEC enforcement against auditors remained high in 2024, aggregate statistics don't tell the full story," said Ms. Forman, Co-Leader of Brattle's Accounting Practice. "In fact, activity appears to have been substantially impacted by the Supreme Court's SEC vs. Jarkesy ruling, which found that the regulator's use of administrative proceedings to seek financial civil penalties for securities fraud was unconstitutional. We expect fallout from Jarkesy and similar constitutional challenges facing the PCAOB – as well as the new presidential administration – to dramatically shift the enforcement landscape moving forward."
Notable findings from the report include:
- 2024 enforcement was driven primarily by the PCAOB, which brought 88% of total actions (51 of 58) initiated against auditors – the highest level of PCAOB enforcement activity since 2017.
- Together, the PCAOB and SEC imposed $52.2 million in monetary sanctions against auditors in 2024, an increase of 66% from 2023 and 2.5 times higher than the 2018–2021 average.
- The PCAOB imposed record penalties for the third consecutive year in 2024 ($35.7 million), more than 23 times the annual average under the PCAOB's prior administration.
- Enforcement activity during the year appears to have been substantially impacted by SEC v. Jarkesy and the John Doe lawsuits facing the PCAOB:
- The SEC initiated only seven auditor actions in 2024, down 50% from 2023, and was the lowest level of annual activity in the authors' seven-year sample.
- Only one-third of PCAOB actions and 2% of penalties were brought in H2 2024 after the Supreme Court issued the Jarkesy ruling in late June, the lowest level of H2 activity of any year between 2018–2024.
The report also includes predictions about changes to the auditor enforcement landscape in and after 2025 due to constitutional challenges faced by both regulators and the impact of Trump's second presidency.
The full report can be found on Brattle's website: https://www.brattle.com/insights-events/publications/2024-enforcement-activity-involving-auditors/.
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