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Big market loser if Trump, SEC end quarterly reporting isn’t investors
With the Securities and Exchange Commission now pursuing President Trump’s request to consider a rule that ends the mandate that public companies file quarterly reports, there’s a lot to gain for companies in time and money, and a lot for the Big Four accounting firms to lose.
Trump originally proposed a switch to semi-annual reporting in a post on Truth Social a few weeks ago, saying it would “save money, and allow managers to focus on properly running their companies.”
SEC Chair Paul Atkins told CNBC soon after that a rule proposal is underway, though he suggested any change would give companies the option to change their reporting schedule. “For the sake of shareholders and public companies, the market can decide what the proper cadence is,” Atkins said.
With semi-annual reports, companies could theoretically halve the considerable costs and labor associated with filing quarterly reports. But the independent, outside accounting firms, in particular the “Big Four” — Deloitte, EY, KPMG and PwC — that help prepare them stand to lose a major portion of their audit business. On average, it takes about 180 hours to prepare a requisite form 10-Q, at an expense that can vary from $50,000 for smaller companies to well over $1 million for large-cap enterprises. And that doesn’t include expenditures for internal audit teams and operations.
It’s important to note the distinction between a quarterly report, or 10-Q, and an earnings report. The SEC-required 10-Q is prepared and reviewed by independent auditors, following strict disclosure standards. Around the same time, via a press release, companies issue a quarterly earnings report — which is not audited — to the media and investors, highlighting revenue, profits and other key metrics featured in the official 10-Q.
“I’m sure [the Big Four] are paying very close attention to this proposal as it potentially moves through the SEC,” said Jerry Maginnis, a CPA and former audit partner at KPMG. “It could have a very significant impact on their business model.”
He estimates that up to 15% of the firms’ annual audit fees “could be going away.”
The Big Four might be able to recoup some of that lost revenue by expanding their advisory and tax services, but if not, they would have to consider cost cuts, said Larry Rand, a visiting professor of economics at Brown University and a financial consultant. “If you are going to be losing a substantial revenue flow, you’re certainly going to have to look at ways of saving money,” he said. “They will hire fewer people. They will use more artificial intelligence tools,” he added.
That’s happening as it is. PwC said in August that it expects to hire one-third fewer people off college campuses by 2028 — 39% fewer in audit — partly driven by the rapid emergence of AI and how it’s changing entry-level jobs. The SEC rule change could be another blow to accounting firms’ workforces.
The proposed SEC rule change came as somewhat of a surprise. It hadn’t been among Trump’s plethora of deregulation targets, from immigration to DEI, nor was it included in the now-prescient Project 2025 playbook.
But during Trump’s first term, he threw out the same pitch in 2018. “That would allow greater flexibility & save money,” he posted on Twitter (now X). “I have asked the SEC to study!” The SEC elicited comments from a variety of affected stakeholders — the accounting industry, investment research firms, institutional and individual investors and academics — but ultimately, momentum stalled.
This iteration is likely to go through the same process, but has a good chance of succeeding, especially considering the current administration’s deregulatory wins to date and agencies’ steady compliance with Trump’s wishes. Indeed, a spokesperson for the SEC said that the agency “is prioritizing this proposal to further eliminate unnecessary regulatory burdens on companies.”
Each of the Big Four accounting firms declined to comment.
Although today’s economy is remarkably different from that in 2018 — look no further than tariffs, trade wars and AI — it’s instructive to review comments accounting firms did make back in 2018 when the SEC first undertook the quarterly reporting issue.
Not surprisingly, considering the negative implications for the industry, all four were in favor of retaining the quarterly cadence, each citing values that it brings to investors and capital markets. Deloitte, for example, said, “By helping to ensure that investors receive regular, timely and reliable information, the SEC regime has helped make the U.S. markets the strongest and most trusted in the world.”
“We believe quarterly reporting minimizes information asymmetry between management and investors and reduces market uncertainty,” EY said. “Quarterly reporting also helps reduce risks in the corporate financial reporting system by facilitating timely identification and resolution of potential accounting and reporting issues.”
Financial statement users, said KPMG, “have historically relied on the negative assurance provided by the auditors’ review for their investment decisions.”
PwC, remarking on the difficulty of reforming reporting, said that the “unstructured nature of earnings releases could make it challenging for investors to determine what information was subject to the independent auditor’s interim review procedures. Additional guidance would need to be developed.”
At the same time they argued against the rule change, the firms were careful to acknowledge the SEC’s authority to review its quarterly reporting schedule, which has been mandated since 1970. For instance, KPMG said, “We applaud the Commission’s continued efforts to take a fresh look at the financial reporting requirements…to update and streamline them for the benefit of all market participants.”
The reporting process, EY said, “could benefit from targeted improvements that would reduce the compliance burden on companies.”
Its merits have long been debated by business leaders and investors, but the concept of semi-annual reporting has precedent. The European Union and the U.K. switched from a quarterly cadence more than a decade ago, although companies can voluntarily choose to issue quarterly reports.
Those foreign companies “are not required to report quarterly, but a fair amount of larger companies still do,” even if it’s not an official earnings release, said Dominic Pappalardo, chief multi-asset manager for financial research firm Morningstar.
Pappalardo can foresee that same scenario being adopted in the U.S., he said. “If the companies think there’s a benefit to giving investors quarterly information, they’re going to continue to do it. I believe that some, if not many, [would] continue to provide some sort of quarterly update,” he said.
Some commentators back in 2018 noted that any public firms needing to issue debt or equity at any given time might have no choice but to report quarterly numbers, or face a higher cost of capital. There will also be some level of peer checks taking place in the market — if a public company is out of step with key competitors on reporting schedules, investor money could move away from it.
For these and many other reasons, accounting firms’ fears of losing business may be less extreme than they seem on the surface. “Even if it’s not required by the SEC,” Maginnis said, “it would not be surprising to me that [certain clients] would want their accounting firm to be involved somewhat similarly to what’s happening currently. In those cases, the revenue streams might not be impacted as much,” he added.
Besides lessening the expense and rigors of quarterly reporting, another argument in favor of a semi-annual mandate is that it would encourage private companies to go public. The number of publicly listed companies in the U.S. has fallen from more than 7,000 in 1996 to less than 4,000 in 2020.
Reinvigorating the IPO market — which has lately been gaining momentum — would be an additional way for the Big Four to keep their heads above water. “From their point of view, it’s zero sum,” Rand said. “They may lose revenues from their existing client base, but will pick up revenues from more companies going public if they know that they only have to report semi-annually.”
It will take months for the SEC to again gather and sift through comments to this proposal. Although the Big Four pushed back, if gently, against Trump’s 2018 proposal, the firms may be more conciliatory this time around — if for no other reason than fretting the type of jawboning that has been a hallmark of Trump 2.0. “That is a pervasive reaction to a lot of potential commenters,” Rand said. “I don’t think it would be a safe thing to do.”
Regardless, Maginnis believes the stars are aligning in favor of the scheduling change. “Between the president’s support and encouragement of this, and the current SEC leadership’s approach to the regulatory landscape, I would say it’s got at least a 50-50 chance of going through, and maybe a little better than that.”
