Partner Jesse L. Jensen and Associate Julia Applefeld are authors of an insightful article entitled “2025 Developments for Auditor Regulations Under the U.S. Securities Laws” published in The Review of Securities & Commodities Regulation.

In recent years, regulatory agencies like the Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) have raised red flags about shortcomings in audit quality as well as the role played by the auditing giants known as the “Big Four”—Ernst & Young (EY), Deloitte & Touche (Deloitte), PricewaterhouseCoopers (PwC), and KPMG. 

The authors state that despite strong messaging around enforcing guidelines for audit quality, the SEC and PCAOB have seen a decline in overall enforcement activity in recent years, and the appointment of new leadership at the SEC and PCAOB may bring different priorities. 

The authors point to a 27% decline in SEC enforcement activity from 2024 to 2025—the lowest level of activity in 10 years.  They note, however, that “this cessation does not necessarily indicate the SEC has abandoned any focus on audit quality altogether, but may instead merely reflect the broader shift away from enforcement by the SEC.”  Jesse and Julia also posit that the lower level of enforcement activity in 2025 might reflect a temporary recalibration and point to a newly formed “Cross-Border Task Force” that “will focus enforcement efforts on gatekeepers, particularly auditors and underwriters, which help these companies access the U.S. capital markets.”

The PCAOB had a comparatively modest decline in enforcement activity, with 40 actions announced in 2025 compared to 53 actions in 2024.  Jesse and Julia also note that the PCAOB issued several disciplinary orders in 2025 that revealed failures in audit quality and imposed fines on the Big Four.  The authors underscore that in less than a decade all Big Four auditing firms have paid tens of millions in fines to settle “fundamental failures in understanding right and wrong” and that the “auditors at these major firms continued their misconduct” even after learning of similar misconduct at other firms.

The shortcomings of the auditing industry were further highlighted in a 292-page U.S Senate report published in 2025 entitled “THIS INDUSTRY IS A JOKE,” which included an in-depth assessment of KPMG’s role in several high-profile banking failures in 2023.  The report points to various ways KPMG could have mitigated the bank failures and concludes that the auditing industry is significantly underregulated and in dire need of reform.

Jesse and Julia then delve into private enforcement actions against auditors in 2025.  In In re SVB Financial Group Securities Litigation plaintiffs assert claims that KPMG’s audit reports falsely omitted material facts.  On June 13, 2025, the district court denied all motions to dismiss filed by KPMG.  The authors also point to other private enforcement actions such as New England Carpenters Guaranteed Annuity & Pension Funds v. DeCarlo, in which the Supreme Court denied a petition for writ of certiorari, thereby allowing a decision to stand that lowered the pleading burden for plaintiffs and made the dismissal of claims more difficult, “potentially exposing auditors to increased securities fraud litigation.”  They also examine Int’l Bhd. Of Elec. Workers Loc. 98 Pension Fund v. Deloitte & Touche LLP, in which plaintiffs reached a $34 million settlement (pending final court approval) over allegations that Deloitte’s audit reports were not reliable.

The authors conclude that there is a crisis of trust in auditing, which has been worsened by “continued news of high-profile failures by auditors to detect massive frauds, and shocking revelations of unethical and even criminal behavior at the top audit firms.”  At the same time, in 2025 “enforcement activity against audit firms by regulators slowed—or even stopped altogether.”  They point to a need to repair this trust in auditors as the gatekeepers of financial markets.