US SEC Weighs Audit Oversight Changes

In an interview with the Wall Street Journal published last month, Kurt Hohl, Chief Accountant at the US Securities and Exchange Commission, outlined potential changes to auditor independence rules and audit inspections as the regulator seeks to reduce compliance costs for firms.

Hohl, who became Chief Accountant in July after 26 years at EY, argued that auditor independence rules are clear in principle but increasingly complex in practice. Problems arise when audit firms partner with non-audit clients that also rely on audit clients, making enforcement more difficult. Understanding “how pervasive that is” and how firms monitor independence is “top of mind,” he said.

Hohl added that partnerships with AI companies and private-equity ownership add further complications. Some private-equity-backed firms have exited public-company audits because it is “too expensive," he lamented, reducing auditor choice. While “there’s nothing in the works to loosen the independence rule,” Hohl said, the SEC is assessing whether the rules remain “fit for purpose.”

Hohl also called for more context in Public Company Accounting Oversight Board inspection reports, such as market share and client mix. He argued that audit quality depends on firms’ “system of quality management” and leadership, not individual engagement teams. He downplayed prospects of folding the PCAOB into the SEC, calling strong audit oversight “critically important to our ecosystem.”