PCAOB urges broker-dealer auditors to reexamine approaches

By Ken Tysiac

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

Inspectors identified audit 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 released Tuesday.

“We have been urging firms that audit broker-dealers to reexamine their audit approaches due to ongoing issues identified during inspections,” said Robert Maday, deputy director of the PCAOB’s Division of Registration and Inspections and program leader of the Broker-Dealer Audit Firm Inspection Program.

The report covers inspections conducted in 2014 of audits for fiscal years that ended on or before May 31, 2014. All of the audits were required to be performed under generally accepted auditing standards, but beginning with fiscal years ending on or after June 1, 2014, audits of broker-dealers will be required to be performed in accordance with PCAOB standards.

The report urges firms:

  • To be proactive in considering how to prevent deficiencies by better anticipating and addressing risks that might arise in specific broker or dealer audits.
  • To continually stress to personnel the need to conduct audits with due professional care and professional skepticism.
  • To have effective procedures for practice monitoring, including performing effective analyses of the root causes of identified deficiencies.
  • To have a system of quality control that is designed to provide reasonable assurance of compliance with requirements and provide guidance and training to firm personnel.

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

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