Broker dealer audit services are required by the SEC to provide enhanced protection to investors. Keeping on top of regulatory changes is a must for any firms who offer this service.
Recent changes to the laws that regulate these audits have made the process more stringent. These laws are designed to protect investors, but they do make the process more complicated for broker-dealers, which is one reason that a public accounting firm should be chosen with care. There are several regulations to consider deciding which firm will complete your broker-dealer audit.
Consumer Protection Oversight
In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act required the Public Company Accounting Oversight Board (PCAOB) to oversee of any audits of brokers or dealers registered with the SEC. Any broker-dealers filing with the SEC after December 31, 2008 must now be certified by a PCAOB-registered public accounting firm.
The Dodd-Frank Act allowed the PCAOB to establish an inspection program of auditors of brokers and dealers. The law leaves it to the Board to determine the scope of the program and the frequency of inspections, along with the categories of exclusion from audits.
In 2011, a temporary rule, adopted by the Board, allows for an interim inspection program while the Board considers the scope and other elements needed for a permanent inspection program. Under this temporary rule, the Board is inspecting auditors of brokers and dealers and identifying and addressing with registered firms any significant issues in the audits.
While this interim program remains in effect, the Board will provide public reports on an annual basis on the progress of the program and any important issues that have been identified. Unless unusual circumstances are present, the Board will not issue any firm-specific inspection reports.
Broker-Dealer Audit Standards
In 2013, the SEC amended Rule 17a-5. These amendments include an updated requirement that any broker-dealers file annual reports with the SEC that are audited in accordance with current PCAOB standards. The SEC also adopted requirements for new compliance and exemption reports.
The SEC approved two attestation standards that cover an auditor’s examination of compliance reports and an auditor’s review of the exemption reports of broker-dealers. New standards for the auditing of financial statements and examinations of compliance reports or reviews of exemption reports have also been included in the amendments.
An accounting firm that is registered by the PCAOB must now certify the financial statements of broker-dealers who file with the SEC. Firms applying for registration must complete an electronic application form and pay an application fee.
Understanding the Broker-Dealer Audit Process
Working with an accounting firm that is experienced with the intricacies audit process and understands the impact of the expanded regulations is essential for broker-dealers. Contact Ernst Wintter & Associates any time with your broker-dealer audit questions.