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August 20, 2013

PCAOB finds “troubling” deficiencies in broker and dealer audits

The review by the US Public Company Accounting Oversight Board (PCAOB) of firms auditing brokers and dealers found deficiencies in the audits of all of the firms inspected.

As part of its interim inspection program, PCAOB inspectors reviewed 43 audit firms and their audits of brokers and dealers registered with the Securities and Exchange Commission.

Inspectors found most audit deficiencies in the audit procedures related to the computations of the customer reserve and net capital requirements as well as audit procedures related to financial statements areas, including procedures regarding tests of revenue, related parties and the risk of material misstatement due to fraud.

Inspectors also found that more than a third of the firms investigated were not compliant to SEC independence rules, as some auditors were involved in the preparation of the financial statements that they audited.

Robert Maday, deputy director of the Division of Registration and Inspections and program leader of the Broker-Dealer Inspections Program said: "The nature and extent of audit deficiencies and independence findings included in this report are troubling. We encourage registered public accounting firms to take action and conduct audits with due professional care, including professional scepticism."

Related link:

PCAOB second progress report

 

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