New standards for auditors of brokers and dealers are focus of PCAOB reminder

By Ken Tysiac

The PCAOB issued a reminder to auditors of brokers and dealers Wednesday that the board’s new audit standards differ in certain respects from previous generally accepted auditing standards that applied to these audits.

PCAOB standards took effect for audits of broker-dealer annual reports for fiscal years ended on or after June 1, 2014.

In a report issued Wednesday, the PCAOB said the first five inspections of broker-dealer audits conducted under the new standards showed deficiencies in the auditors’ application of the standards.

The new standards differ in some ways from the previous standards and also contain different requirements for carrying broker-dealers—who have custody of customer assets—and noncarrying broker-dealers, who do not have custody of customer assets.

The PCAOB advised that auditors who desire clarification of the standards can email the PCAOB at standards@pcaobus.org, or review the board’s staff guidance on the issue, which was published in June.

“This report alerts broker-dealer auditors—particularly those who are new to PCAOB oversight and applying board standards—to the findings to help auditors think about the application of the new standards,” PCAOB Chairman James Doty said in a news release. “Also, we want to make sure auditors know that they can receive assistance from us in understanding what the standards require.”

The PCAOB’s inspections were focused on areas relevant to amended SEC rules and aspects of the auditor’s work that are unique to engagements subject to PCAOB standards. This included the examination of compliance statements and review of exemption statements.

Approximately 75 firms’ broker-dealer audit work and portions of approximately 115 audit and attestation engagements of broker-dealers will be inspected by the PCAOB this year.

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA editorial director.

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