PCAOB urges improvement in broker and dealer audits

By Ken Tysiac

Auditors of brokers and dealers should take several steps to enable the highest quality in the engagements they perform, according to a PCAOB report issued Friday.

The report on PCAOB inspection findings of 115 audits by 75 firms from the 2016 audit cycle found similar rates of deficiencies to engagements from the 2015 audit cycle. The PCAOB observed deficiencies in 97% of the firms inspected in 2016, compared with 96% in 2015.

Inspectors found deficiencies in 83% of the 2016 audits inspected, a slight increase from 77% in 2015. The PCAOB observed modest improvement in related attestation engagements; deficiencies were observed in 48% of the 2016 engagements inspected, compared with 55% in 2015.

“I hope auditors will use the information in this report to help plan and perform their audit and attestation engagements,” Helen Munter, the PCAOB’s director of registration and inspections, said in a news release.

The PCAOB advises that firms:

  • Ensure that they have taken measures to comply with independence requirements for the audit and attestation engagements they perform.
  • Undertake only broker-dealer audit and attestation engagements that the firm can reasonably expect to complete with professional competence.
  • Consider whether the audit, attestation, and other deficiencies described in the PCAOB’s report might be present in their current engagements. If deficiencies are observed, take appropriate action to correct them.
  • Maintain policies and procedures that provide reasonable assurance that the work performed meets applicable PCAOB standards and regulatory requirements.
  • Ensure that an engagement quality review is performed for all audits and related attestation engagements. The reviews should be performed by a quality individual at the firm or outside the firm, and should be performed in accordance with Auditing Standard 1220, Engagement Quality Review.
  • Give attention to the importance of effective practice monitoring, including performing effective analyses of the root cause of these matters.
  • Provide appropriate guidance and training to firm personnel and evaluate the appropriateness of the firm’s policies on supervision, including review, so that partners and supervisory personnel are placing appropriate attention on these matters.

Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is a JofA editorial director.

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