PCAOB Proposes Standards for Broker-Dealer Audits and Auditing Supplemental Information

The PCAOB issued proposed standards for audits of broker-dealer and issuer engagements for public comment Tuesday.


The proposals consist of two attestation standards related to the auditor’s examination of compliance reports and review of exemption reports of broker-dealers proposed by the SEC as part of its amendments to the broker-dealer financial reporting rule under Securities Exchange Act of 1934 Rule 17a-5. The proposals also include a new standard on auditing supplemental information accompanying audited financial statements that broker-dealers and issuers file with the SEC.


“Today’s proposals are an important and necessary step for implementation of section 982 of the Dodd-Frank Wall Street Reform and Consumer Protection Act,” said PCAOB Chairman James Doty in a news release.


Sections 17(a) and (e) of the Securities Exchange Act and Exchange Act Rule 17a-5 together require a broker or dealer to file an annual report with the SEC and the broker or dealer’s designated examining authority. On June 15, the SEC proposed to amend Rule 17a-5 to require a broker or dealer’s annual report to include a financial report and either a compliance report examined by an auditor or an exemption report reviewed by an auditor. The SEC’s proposed amendments to Rule 17a-5 require that the auditor’s examination or review of the compliance report and exemption report be conducted in accordance with PCAOB standards.


The two proposed attestation standards, Examination Engagements Regarding Compliance Reports of Brokers and Dealers and Review Engagements Regarding Exemption Reports of Brokers and Dealers, would describe the auditor’s responsibilities for the examination report and review report required by SEC proposed Rule 17a-5.


The PCAOB also is proposing the auditing standard, Auditing Supplemental Information Accompanying Audited Financial Statements, which would supersede the board’s auditing standard AU section 551, Reporting on Information Accompanying the Basic Financial Statements in Auditor-Submitted Documents, and related amendments.


This proposal would establish financial statement auditors’ responsibilities when they are engaged to audit and report on supplemental information. Examples of supplemental information include the supporting schedules that brokers and dealers are required to file with the SEC. The proposed standard also would apply to certain supplemental information of issuers that is included in SEC filings.


“Issuing the proposed attestation standards today will allow interested parties to review and comment on both the PCAOB and SEC proposals,” said PCAOB Chief Auditor and Director of Professional Standards Martin Baumann in a press release. “The proposed standard on auditing supplemental information fills an important need for audits of broker-dealers and issuers.”


Comments on the proposed standards are due Sept. 12.


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