Every year, the Public Company Accounting Oversight Board (PCAOB) releases a report of broker dealer audit findings under its interim inspection program. For nine years in a row, the report indicated a high level of broker dealer audit deficiencies in certain areas of engagement performance.
The importance of the PCAOB’s oversight
The PCAOB exists to oversee audits of public companies, thus protecting investors and their interests. It helps public interest by ensuring that broker dealer and nonprofit audits are conducted independently, prepared correctly, and filled with accurate information. The PCAOB specially began overseeing audits of broker dealers in 2010, making sure broker dealers are working for the full benefit of their clients.
The common deficiency findings in broker dealer audits
In the August 2020 PCAOB interim program inspection report, the findings in broker audits were similar to those of past inspections. 71% of those inspections contained deficiencies in one or more of the following engagement areas:
- Financial statement preparation
- Review engagement deficiencies
- Examination deficiencies
- Incomplete auditing of:
- Financial statement presentation & disclosures
- Related party transactions
- Consideration of going concern
- Post-audit matters
- The Net Capital Rule
- The Customer Protection Rule
What this means for your organization
While the above information is specific to auditors, broker dealer firms need to have an accurate and reliable audit to comply with regulations. To make the audit an easy process, firms should focus on these key areas, organize supporting documentation, and be familiar with GAAP and SEC rules.
Small broker dealer firms might not have the same resources as large firms, and need assistance to prepare financial statements. If you reach out for outside help, work with an accounting firm that has extensive industry experience and plenty of successful audits behind them.