Sanctioned Auditors and Former PCAOB Staff Say Enforcement Falls Short on Fairness

The Public Company Accounting Oversight Board (PCAOB) polices the auditors of public companies. Congress told it, in the Sarbanes-Oxley Act of 2002, to enforce its standards fairly. Whether it does so is hard to judge from the outside, because the enforcement process is largely closed to public view. A study led by Nathan Cannon, Associate Professor of Accounting at the McCoy College of Business at Texas State University, goes inside that process by interviewing the people who have lived it. His co-authors are Phillip Lamoreaux and Eldar Maksymov of Arizona State University and Noah Myers of Utah Valley University. The paper appears in Contemporary Accounting Research.

The study

The researchers interviewed 33 people who are normally very hard to reach. Twenty were auditors who had been sanctioned by the PCAOB. Thirteen were former members of the PCAOB’s own enforcement staff. Hearing from both sides of the table is what makes the study unusual.

The interviews were analyzed through the lens of procedural justice theory. That theory holds that people judge a process as fair based on things like whether they get a real chance to be heard, whether decision makers are neutral, and whether they are treated with respect, not only on the outcome. The study was prompted in part by a former PCAOB board member’s public call for more transparency and for outside suggestions on how to improve enforcement.

What the researchers found

The authors conclude that the enforcement process falls short of fairness in several important respects. Three concerns came up from both sanctioned auditors and former enforcement staff.

First, the language in public enforcement orders is described as one-sided and overly damning. Orders present the PCAOB’s view without the auditor’s side, and they follow the auditor for the rest of their career.

Second, the process does not assess whether investors were actually harmed. A technical violation of an auditing standard can draw a sanction even when no one lost money.

Third, enforcement staff face incentives to bring cases and secure sanctions. Interviewees said this pressure falls hardest on small audit firms, which cannot afford a long and costly defense and may settle rather than fight.

The former staff members’ agreement with these points is notable. These are not only the complaints of people who were punished. Insiders who ran the process describe the same weaknesses.

What it means for regulators, firms, and policymakers

For the PCAOB, the study offers a set of improvement suggestions drawn directly from participants. The authors discuss those in the paper. The broad direction is toward more balanced public orders, some consideration of investor harm, and attention to how case incentives shape staff behavior.

For audit firms, especially smaller ones, the findings put firsthand voices behind a long-standing worry: that the cost of defending an enforcement action can exceed the cost of settling, regardless of the merits. Firms should plan for that reality when deciding how to respond to an investigation.

For policymakers and investors, the study is a reminder that oversight of auditors is itself worth overseeing. Sarbanes-Oxley demands fair enforcement. Academic evidence on whether the process delivers it has been thin, and this paper adds accounts from the people on both sides.

This summary is based on the paper’s abstract. The full article reports the interview methods, the participants’ accounts, and the authors’ detailed recommendations.

What it means for managers

• Both sides of the enforcement table describe the same fairness gaps. That agreement makes the concerns hard to dismiss as complaints from the punished.
• Public enforcement orders are seen as one-sided and damning, and they do not weigh whether investors were actually harmed. Regulators should consider more balanced orders and a harm assessment.
• Small audit firms bear the brunt. Interviewees say enforcement staff face incentives to sanction, and small firms settle because a defense costs too much. Firms should plan for that dynamic.

Cannon, N., Lamoreaux, P., Maksymov, E., & Myers, N. (2025). Is the PCAOB enforcement approach aligned with its mandate? Perspectives of sanctioned auditors and former PCAOB enforcement staff. Contemporary Accounting Research, 42(2), 807-836. 10.1111/1911-3846.13019