The first five inspections of broker-dealer audit and new attestation engagements subject to PCAOB standards show deficiencies in the auditors’ application of these standards according to the PCAOB.
The requirement to follow PCAOB standards became effective for broker-dealer annual reports with fiscal years that ended on or after June 1, 2014, pursuant to an amendment to SEC Exchange Act Rule 17a-5.
The PCAOB audit standards differ in certain respects from audit standards that previously applied. In addition, the new attestation standards distinguish between the requirements for carrying broker-dealers with custody of customer assets and those who are non-carrying and do not have such custody.
In a brief summary inspection report covering five broker-dealer audit and attestation engagements conducted by five auditors in 2014, the PCAOB described deficiencies, relative to the new requirements, observed in the five audits and four of the five related attestation engagements.
Auditors of broker dealers are under scrutiny. In a recent enforcement sweep, the SEC and PCAOB collectively charged 15 audit firms for violating independence requirements in connection with audits of broker-dealers.