Trump’s regulatory rollback risks $430M in US audit fees as SEC proposes gutting post-Enron rules

The SEC just proposed tripling the threshold that determines which public companies need independent audits of their internal financial controls. If finalized, the change would exempt around 1,700 companies from one of the most consequential investor protections to emerge from the Enron era, and it would vaporize an estimated $430 million in annual revenue for US accounting firms.

SEC Chair Paul Atkins wants to raise the public float exemption for Section 404(b) auditor attestation from $700 million to $2 billion. That section of the Sarbanes-Oxley Act, passed in 2002 after Enron and WorldCom turned corporate accounting into a spectator sport, requires outside auditors to independently verify that a company’s internal controls over financial reporting actually work.

The money at stake

The companies that would fall under the new exemption collectively paid $3.8 billion in total audit fees in the prior year. The $430 million slice specifically tied to 404(b) attestation work represents a meaningful revenue stream for audit firms, particularly the Big Four: EY, Deloitte, PwC, and KPMG.

All four have pushed back against the proposal, joined by the Center for Audit Quality and multiple investor advocacy groups. Their argument boils down to a simple tension: loosening these rules saves companies money on compliance, but it also removes a layer of independent verification that was specifically designed to catch the kind of fraud that wiped out billions in shareholder value two decades ago.

The proposal’s supporters frame it differently. They see the attestation requirement as a barrier to going public, an expensive toll booth that discourages mid-sized companies from listing on US exchanges. Under their logic, companies would still face standard financial statement audits. They just wouldn’t need a separate, independent review confirming their internal processes are sound.

The deregulation playbook

This proposal doesn’t exist in a vacuum. It’s part of a broader deregulatory agenda under the Trump administration’s SEC, which has systematically moved to reduce compliance burdens across public markets.

The original $700 million threshold was itself a compromise. When SOX first passed, Congress intended all public companies to comply with 404(b). The exemption for smaller companies came later, after years of complaints that the cost of compliance was crushing for firms without the scale to absorb it. Raising that threshold to $2 billion extends the same logic further up the market cap spectrum, but it also extends it into territory where companies are large enough that internal control failures could meaningfully harm public investors.

The Sarbanes-Oxley Act was a direct response to a specific kind of corporate catastrophe. Enron’s $63 billion bankruptcy in 2001 and WorldCom’s $11 billion accounting fraud weren’t caused by small companies cutting corners. They were massive enterprises whose internal controls either failed or were deliberately circumvented. The law’s architects designed 404(b) attestation specifically because standard audits alone hadn’t been enough to catch those problems.

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