The PCAOB approved new standards for auditors of brokers and dealers.
Two new attestation standards are designed to help protect customer funds by establishing rules for examinations and reviews of compliance information that broker-dealers submit to the SEC.
A new auditing standard applies to procedures performed and reporting on supplemental information that brokers and dealers file with the SEC. The board also adopted related amendments to other PCAOB standards.
The standards were enacted in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203, which authorized the PCAOB to oversee audits of brokers and dealers registered with the SEC. Previously, the generally accepted auditing standards of the AICPA Auditing Standards Board governed broker and dealer audits.
If approved by the SEC, the standards and amendments will take effect for services performed for fiscal years ending on or after June 1, 2014. The standards are available at tinyurl.com/ljlwypy and tinyurl.com/m8n73af.
AICPA President and CEO Barry Melancon, CPA, CGMA, issued a statement saying the AICPA has been consistent in its position that brokers and dealers should be subject to SEC regulation, and that auditors of brokers and dealers that carry, clear, or have custody of customer funds should be subject to the PCAOB’s standards, inspections, and enforcement programs.
Melancon said it is critical that the PCAOB use risk analysis in determining which audits of broker-dealers should be included in a permanent inspection program that will be implemented by the board.
“We urge the board to act expeditiously in determining the scope of that program,” he said.
The PCAOB, which is operating an interim inspection program, anticipates presenting a rule proposal for a permanent inspection program in 2014 or later.
Companies in the U.K. FTSE 350 will be required to place their audit contracts out for bid every 10 years under new rules announced by the U.K. Competition Commission (CC).
The rules represent a softening of the five-year mandatory retendering proposed earlier by the CC. Some businesses and regulators, including the U.K. Financial Reporting Council (FRC), voiced opposition to the five-year retendering proposal.
But the CC’s rules are stronger than those imposed in 2012 by the FRC, which merely required companies that did not go to tender every 10 years to explain their reasons for not retendering.
The CC said in a news release that it is aware that its rules may be affected by audit reform measures the European Union (EU) is considering. But the CC said it is acting based on the evidence of its own investigation in the absence of definitive EU proposals. The CC said it will be able to amend its rules, if necessary, if the EU agrees upon measures. The EU is considering a possible mandatory audit firm rotation requirement.
The CC also will require that the FRC’s Audit Quality Review team review every audit engagement in the FTSE 350 every five years, on average; prohibit Big Four-only clauses in loan agreements; require a shareholder vote at the annual meeting on whether audit committee reports in company annual reports are satisfactory; and strengthen the accountability of the external auditor to the audit committee and reduce management’s influence.