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August 21, 2012

PCAOB finds deficiencies on brokerage audits

In the first review of broker audits the US Public Company Accounting Oversight Board (PCAOB) found most statements lacked proper review before being signed off.

As part of its interim inspection program, PCAOB reviewed 23 audits of SEC-registered brokers and dealers undertaken by ten firms whose names have not been disclosed.

The nature and extent of the initial inspections are of concern to the PCAOB and board member Jeanette Franzel said the results are “disturbing”.

PCAOB has found audit deficiencies in three main areas: the observance of customer protection and net capital rules; audits of financial statements; and failures to comply with auditor’s independence requirements.

However the findings cannot be generalised to all securities broker and dealer audits as they “represent only a small proportion of the inspections planned for the interim program,” PCAOB chairman James Doty said.

The PCAOB expects to review around 100 audit firms in 2013.

In 2011 the US watchdog was empowered to expand it oversight authority over auditors of broker and dealers in compliance with the Sarbanes-Oxley Act.

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