The word audit immediately brings a sense of dread to your small broker dealer firm. Do not worry, rather, take action. Being prepared is the best way to handle an upcoming audit. The standards of the audit must meet all the criteria set by the Public Company Accounting Oversight Board (PCAOB). Protecting the rights of your clients is the goal of the PCAOB. Preparing for an audit should be an ongoing process to ensure the highest level of compliance.
Audit Tips for Your Smaller Broker Dealer Firm
Successfully navigating through the audit process requires your firm to be proactive throughout the entire year. Reducing the smallest errors prior to the audit will prevent your firm from paying large fees or fines.
1. Employee Involvement
Begin by explaining to your key employees the importance of the yearly auditing process. Encouraging your employees to pay attention to the smallest details helps in noticing any inaccuracies. By involving your employees from the beginning, they will be able to see the bigger picture of the audit process. Many employees perform better with a sense of company involvement.
2. Test with Internal Audits
Make internal audits part of your broker dealer firm’s routine. The internal audit is a great testing tool for troubleshooting any area, particularly those not in full compliance. If your firm is not performing at the highest level of output, you will be able to make changes. Repeating the internal audit is dependent on the outcome. The implementation of the internal audit allows your firm a chance to back up files with the correct documentation to prepare for the external audit.
3. Review Documents
Using an internal audit allows your firm a chance to review all important documents pertaining to your clients. By reviewing the documents, you will be able to determine your firm’s overall performance. Handling other people’s assets requires documentation or written records of all the transactions. Your firm will be able to use internal audits to match financial statements filed with the U.S. Securities and Exchange Commission (SEC). If a document is not correct or missing, your firm has a chance to change procedures in recording information to ensure your external audit goes smooth.
4. Know the Financial Industry Regulatory Authority Rules (FIRA)
Changes to the FIRA rules happen periodically. Your firm must adhere to the changes to stay compliant. By following the FIRA changes, your firm will be able to eliminate any risks or oversights during the auditing process. Getting to know the newest guidelines may require some research.
5. Meet and Review
Being an active partner in preparing for the audit is a must. Call meetings to review the different phases of the audit process.
- Ask questions about problem areas.
- Use the general ledger as a resource tool for discussing possible inaccuracies.
- Talk about changes to your firm that may affect the upcoming audit.
- Use your previous year’s audit report as a basic guide to correcting any mistakes or inaccuracies found during the auditing process.
Being proactive, following all the SEC rules, and being vigilant to changes helps in preparing a small broker dealer for an audit. To get an early start, contact an auditing and accounting firm such as Ernst Wintter & Associates. Our Certified Public Accountants will assist you in gathering the necessary materials for the audit review process. Call or email us today to schedule an appointment.