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With the Securities and Exchange Commission, which is now pursuing President Trumpthe request to consider a rule that ends the mandate These public companies submit quarterly reports, there is something to earn for companies on time and money and many for the big four accounting companies to lose.
Initially, Trump suggested a transition to a half -year report to a Truth Social publication a few weeks ago, saying it would “save money and allow managers to focus on proper management of their companies.”
SEC Chairman Paul Atkins told CNBC shortly thereafter a rule proposal was underway, although he suggested that any change would be Allow companies to change their reporting schedule. “In the name of shareholders and public companies, the market can decide what the right cadans is,” Atkins said.
With half -year reports, companies can theoretically reduce the significant costs and labor related to the submission of quarterly reports. But independent outside the accounting companies, more specially, the “big four” – Deloitte, EY, KPMG and PWC – which help to prepare them to lose much of their audit business. On average, it takes about 180 hours to prepare the required 10-Q form, for an expense that can range from $ 50,000 for smaller companies to over $ 1 million for large-capital businesses. And this does not include costs for internal audit teams and operations.
It is important to note the difference between a three-month report or 10-Q and a profit report. The SEC-Required 10-Q is prepared and reviewed by independent auditors, following strict standards of disclosure. At about the same time, through a press release, the companies issue a quarterly report on profits-which is not audited by media and investors, emphasizing revenue, profits and other key indicators presented in the official 10-Q.
“I’m sure (the big four) is paying a lot of attention to this proposal as it potentially moves through SEC,” says Jerry Maginis, CPA and a former KPMG audit partner. “This can have a very significant impact on their business model.”
He estimates that up to 15% of the annual audit fees of the companies can disappear.
The big four may be able to recover some of the lost revenue by expanding its consulting and tax services, but if not, they will have to consider reducing costs, said Larry Rand, a visiting professor of economics at Brown University and a financial consultant. “If you are going to lose a significant flow of revenue, you will surely have to look at ways to save money,” he said. “They will hire less people. They will use more artificial intelligence tools,” he added.
This happens as it is. Said pwc In August, he expects to hire one-third fewer people from college at college by 2028 39% less in audit-designed AI’s rapid appearance and how jobs at Entrance Level change. Changing the SEC rules may be another blow to the workforce of accounting companies.
The proposed change in the SEC rule came as a surprise. This was not among the many Trump deregulation goals, from immigration to DEI, nor was it included in the already calling Project 2025 Playbook.
But during Trump’s first term, he dumped the same terrain in 2018. “This would allow more flexibility and save money,” he published on Twitter (now X). “I asked SEC to study!” Sec erupted Comments From various stakeholders affected – the accounting industry, investment research companies, institutional and individual investors and scientists – but ultimately, the impulse stopped.
This iteration is likely to go through the same process, but there is a great chance of succeeding, especially given the current administration Deregulatory victories so far And the constant adherence to Trump’s wishes. In fact, a SEC spokesman said the agency “prioritizes this proposal for further removal of unnecessary regulatory weights for companies.”
Each of the large four accounting companies declined to comment.
Although today’s economy is remarkably different from that in 2018 – don’t watch more than tariffs, trade wars and AI – it is instructive to review the comments that accounting companies made in 2018 when the SEC for the first time took the quarterly report.
Not surprisingly, given the negative consequences for the industry, all four were to preserve the quarterly cadans, each for citing values ​​it brings to investors and capital markets. Deloitte, for example, said: “Helping to ensure that investors receive regular, timely and reliable information, the SEC regime has helped make US markets the most strong and reliable in the world.”
“We believe that quarterly reporting minimizes information asymmetry between management and investors and reduces market uncertainty,” AY said. “Quarterly reporting also helps reduce the risks in the corporate financial reporting system by facilitating timely identification and resolving potential accounting and reporting issues.”
Financial report users said KPMG, “historically relied on the negative confidence provided by the auditors’ review for their investment decisions.”
PWC, noting the difficulty in reforming reporting, stated that “the unstructured nature of profit editions may make an investor challenge to determine what information is subject to temporary procedures for reviewing the independent auditor. Additional guidelines will need to be developed.”
At the same time, they argued against the change of rules, the companies were careful to acknowledge SEC’s powers to review its quarterly reporting schedule, which is a mandate of 1970. For example, KPMG said: “We applaud the continuous effort of the market and the participation requirements for financial accounting
The reporting process, said EY, “can benefit from target improvements that would reduce the weight of compliance for companies.”
His merit has long been discussed by business leaders and investors, but the concept of half -year reporting has a precedent. The European Union and the United Kingdom have passed from a quarterly cadance more than a decade ago, although companies can voluntarily choose to issue quarterly reports.
These foreign companies “are not required to take into account quarterly but still much larger companies”, even if it is not a formal release of profit, said Dominic Papalardo, General Manager of Morningstar Multi-Financial Research Company.
Papalardo can predict the same scenario that is accepted in the US, he said. “If companies believe it benefits from providing quarterly investor information, they will continue to do so. I believe some, if not, (would) will continue to provide some three months update,” he said.
Some commentators in 2018 have noted that all public companies that have to issue debt or equity at a time may have no choice but to report quarterly numbers or face a higher cost of capital. There will also be some level of partner inspection checks on the market – if a public company is out of step with key competitors about reporting schedules, investor money can move away from it.
For these and many other reasons, the fears of accounting companies to lose business may be less extreme than it looks on the surface. “Even if it is not required by SEC,” Magica said, “It would not be surprising to me that (certain customers) would like their accounting firm to be involved in somewhat similar to what is happening right now. In these cases, the streams of revenue may not be affected so much,” he added.
In addition to reducing the costs and the rigor of the quarterly reporting, another argument in favor of a half -term mandate is that it will encourage private companies to publish publicly. The number of publicly listed companies in the United States fell from over 7000 in 1996 to less than 4000 in 2020.
IPO’s nourishment – which has recently been is gaining momentum – It would be an additional way for the big four to hold their heads above the water. “From their point of view, this is a zero sum,” Rand said. “They can lose revenue from their existing customer base, but will take revenue from more companies that will publicly publish if they know that they only have to report half -year.”
It will take months for SEC to re -assemble and sift comments on this proposal. Although the Big Four pulled back, albeit slightly, against Trump’s 2018 proposal, companies may be more primitive this time – if for another reason, besides beaten the jaw type, which was a distinctive feature of Trump 2.0. “This is a comprehensive reaction to many potential commentators,” Rand said. “I don’t think something would be for sure.”
Nevertheless, Maginis believes that the stars align in favor of changing planning. “Between the support and the encouragement of the president and the approach of the current SEC leadership to the regulatory landscape, I would say that there is at least 50-50 chance of passing and perhaps a little better than that.”
