'UNACCEPTABLY HIGH' ISSUES WITH BROKER-DEALER AUDITS

Chicago -- The Public Company Accounting Oversight Board is continuing to find a high degree of problems in audits of broker-dealers, despite some improvements, according to PCAOB member Jeanette Franzel.

Speaking at a PCAOB forum in early June in Chicago, Franzel discussed the results of the board's efforts to inspect the auditors of broker-dealers.

"Although we are seeing some improvements in the number of inspected audits with independence problems and certain types of audit deficiencies when comparing 2013 results to prior years' results, the number of inspected audits with these types of observations remains unacceptably high," she said.

Franzel noted that the PCAOB is likely to extend its interim inspection program as broker-dealers and auditors transition to the PCAOB's new rules and standards.

The board was given more ability to inspect audits of broker-dealers as part of the Dodd-Frank Act of 2010, in response to the outcry over the lack of audits of securities firms such as the one run by Ponzi schemer Bernard Madoff.

Franzel said that the PCAOB staff plans to issue staff guidance for audits of smaller broker-dealers in the near future to help firms transition to the new PCAOB standards, which are effective for audits of financial statements with fiscal years ending on or after June 1, 2014.

The results for all three years that the PCAOB has been inspecting the audits of broker-dealers show a high number of negative observations."Although we are seeing some improvements in the number of inspected audits with independence problems and certain types of audit deficiencies when comparing 2013 results to prior years' results, the number of inspected audits with these types of observations remains unacceptably high," Franzel said.

"Firms need to take steps to improve the quality of their broker-dealer audits to achieve compliance with applicable rules and standards and the overall goals of protecting investors and the public interest," she added.

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