PCAOB focuses on audits of brokers, dealers

The board shared inspection objectives and urged firms to review processes.

PCAOB inspectors will focus on five areas of audit firm performance in their 2015 inspections of auditors of brokers and dealers, according to a staff inspection brief the board published.

The PCAOB issued the brief to help auditors, audit committees, investors, and preparers understand the inspection process and its results and to highlight inspection processes, plans, and scope.

Inspectors in 2015 are evaluating how firms performed on audit and attestation engagements and are focusing on:

  • Financial statement audit areas that had deficiencies identified in past inspections, including revenue recognition and the use of information produced or used by brokers or dealers.
  • The examination of compliance reports and the review of exemption reports under newly applicable PCAOB standards.
  • Audit procedures on the supplemental schedules to the financial statements.
  • The engagement quality review.
  • Auditor independence.

In 2015, the PCAOB plans to inspect about 75 firms that audit brokers and dealers, covering certain portions of approximately 115 selected audit and attestation engagements of brokers and dealers. These engagements are now required to be conducted in accordance with PCAOB standards as a result of recent rules amendments. Previously, these audits were conducted under generally accepted auditing standards.

The PCAOB also is encouraging audit firms that audit broker-dealers to carefully review their processes in light of findings from inspections conducted in 2014.

Inspectors identified deficiencies in 87% of the audits they reviewed, and each of the 66 firms inspected had deficiencies in at least one audit it performed, according to the annual report on the PCAOB's interim inspection program.

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