New Bill Links Foreign-Controlled Audits to Trading Bans, Makes Oversight Hearings Private by Default

The Trusted Foreign Auditing Act of 2025 is aiming to secure U.S. markets by cracking down on accounting firms that might be under the thumb of foreign governments deemed national security threats. The core of this bill is simple: if a publicly traded company based in a “covered country” (a nation flagged by U.S. intelligence as a threat) hires an auditor that the law defines as “compromised,” that company faces immediate trading restrictions.

The National Security Stress Test for Accountants

This bill introduces two critical definitions. A “Covered Country” is basically any nation the Director of National Intelligence names as a national security threat. A “Compromised Auditor” is a branch of an accounting firm operating in a Covered Country that is directly or indirectly controlled, directed, or significantly influenced by that country’s government or political party. This includes any agreement that might hurt the auditor’s independence. Think of it this way: if you’re a U.S. investor relying on the audit of a company based in a flagged nation, this law is designed to ensure that the audit wasn't secretly edited by that nation's government.

If a public company headquartered in one of these Covered Countries uses a Compromised Auditor for its financial reports, Section 2 of this Act triggers existing trading prohibitions established under the Sarbanes-Oxley Act. For the busy professional, this means the U.S. is putting its foot down: if your financial reporting is compromised by foreign government influence, you can’t trade on our exchanges. This provision directly affects companies and investors dealing with firms in these flagged jurisdictions, adding a layer of risk assessment to international business dealings.

The Trade-Off: Security vs. Transparency

While Section 2 is about tightening security, Section 3 introduces a major shift in transparency regarding the Public Company Accounting Oversight Board (PCAOB). The PCAOB is the federal body that oversees the audits of public companies. Currently, many of its disciplinary hearings are public, which keeps the regulatory process transparent.

Under this new Act, hearings related to these specific audits will default to private. They will only be made public if the Compromised Auditor hired by the Covered Issuer is actually a party in the hearing, or if the Board finds “good cause” and everyone involved in the hearing agrees to make it public. This is a significant change. Moving these oversight hearings behind closed doors means the general public, the media, and watchdogs lose visibility into how the PCAOB is investigating and penalizing firms that might be compromised by foreign governments. While the goal might be to protect sensitive intelligence or proprietary information, the cost is a loss of public accountability for the regulators themselves.

What This Means for Your Portfolio and Public Trust

For investors, the good news is that the bar for audit integrity is being raised, potentially reducing the risk of being blindsided by financial fraud enabled by foreign government interference. The bad news is that the process for ensuring that integrity—the oversight hearings—is becoming less transparent. If you’re an international firm, especially one operating in a country flagged by U.S. intelligence, you now face much stricter scrutiny and the threat of being designated a “Compromised Auditor” based on criteria like being “significantly influenced” by a foreign government. Since the criteria for what counts as “significantly influenced” are somewhat vague, the PCAOB gains considerable, potentially subjective, power in making these designations.

Ultimately, this bill tries to solve a national security problem in the financial markets by creating a stricter enforcement mechanism. But it simultaneously reduces public oversight of that enforcement mechanism, creating a classic trade-off between perceived security and public transparency.