New regulations mean big changes for brokers and dealers—and their auditors

BY KEN TYSIAC

New regulations that take effect June 1 will lead to significant changes for brokers and dealers, futures commission merchants, and their auditors, the AICPA and the Center for Audit Quality (CAQ) said Monday.

Auditors should discuss the changes with their broker and dealer and futures commission merchant clients as soon as practicable, the AICPA and CAQ advised in a joint member alert. The alert describes the regulatory changes that apply to audits and attestation engagements of brokers and dealers and futures commission merchants, including those that are dually registered.

The alert addresses:

  • SEC amendments to Rule 17a-5, whose requirements include the specification that financial statement audits of SEC-registered brokers and dealers must be performed in accordance with PCAOB standards.
  • PCAOB Attestation Standard No. 1, which governs examination engagements regarding compliance reports of brokers and dealers, and Attestation Standard No. 2, which governs review engagements regarding exemption reports of brokers and dealers. These engagements are required under the SEC’s amendments to Rule 17a-5, and the independent public accounting firm registered with the PCAOB that performs the audit of the annual financial statements also must be engaged for the examination or review, according to the alert.
  • PCAOB Auditing Standard No. 17, which describes the financial statement auditor’s duties when engaged to report on whether supplemental information accompanying the financial statements is fairly stated, in all material respects, in relation to the financial statements as a whole.
  • Independence considerations. Independence rules that apply to audits of brokers and dealers recently have been a focus of the PCAOB and SEC.
  • New Commodity Futures Trading Commission (CFTC) customer protection rules that will affect audits of futures commission merchants and those dually registered as futures commission merchants and brokers and dealers.
  • The continuing requirement that audits of introducing brokers solely registered with the CFTC be performed under AICPA standards, including AICPA independence standards. This requirement was not changed by amendments to CFTC regulations.
  • The PCAOB’s broker and dealer inspection programs, and forums the PCAOB holds to share important information about its activities with smaller broker and dealer auditors that are registered with the PCAOB.
  • Activities of the AICPA’s peer review program with respect to audits of brokers and dealers.


“This member alert, part of a professionwide effort to identify ways to boost investor confidence in the integrity of audited financial statements, will help auditors of brokers and dealers and futures commission merchants navigate recent regulatory changes,” AICPA President and CEO Barry Melancon, CPA, CGMA, said in a news release.

The new rules addressed in the alert generally are effective for audits and attestation engagements of broker and dealers and futures commission merchants with fiscal years ending on or after June 1, 2014. Other rule changes have earlier or later effective dates, but this alert only focuses on the major changes that take effect June 1.

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA senior editor.

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