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October 10, 2013

PCAOB adopts standards for brokers’ audits

The Public Company Accounting Oversight Board (PCAOB) has issued standards for auditors of brokers and dealers and an auditing standard for supplemental information, pending the Securities and Exchange Commission’s (SEC) approval.

At an open board meeting today, PCAOB considered two attestation standards related to the auditor’s examination of compliance reports and the review of exemption reports of broker-dealers.

The PCAOB has the power to oversee the audits of broker-dealers registered with the SEC, after the Dodd-Frank Act amended the Sarbanes-Oxley Act in 2010.

Last July, SEC amended Rule 17a-5 of the Securities Exchange Act 1934 to require that only PCAOB-registered firms, following PCAOB standards, can conduct:

  • audits of broker-dealers’ financial statements and supplemental information,
  • examinations of broker-dealers’ compliance reports,
  • reviews of broker-dealers’ exemption reports

PCAOB chairman James Doty said he was pleased to support the adoption of the two standards at today’s board meeting and said:

"These standards are designed to address the SEC’s requirements that brokers and dealers file with the SEC annual financial reports, including supporting schedules, that are audited in accordance with PCAOB standards, as well as file one of two new reports — either a compliance report or an exemption report — and the related auditor’s report".

PCAOB chief auditor and director of professional standards Martin Baumann said both standards put emphasis on the coordination between the review engagement, the audit of the broker-dealer’s financial statements and audit procedures performed on the supplemental information.

PCAOB said both standards, Examination Engagements Regarding Compliance Reports of Brokers and Dealers and Review Engagements Regarding Exemption Reports of Brokers and Dealers, will be effective for examination engagements and review engagements of fiscal years ending on or after 1June 2014.

Regarding Auditing Standard No. 17 Auditing Supplemental Information Accompanying Audited Financial Statements, PCAOB said it supersedes the interim auditing standard AU sec. 551 Reporting on Information Accompanying the Basic Financial Statements in Auditor-Submitted Document.

Related article

SEC hardens broker-dealer audit requirements

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