The Public Company Accounting Oversight Board has published a staff inspection brief detailing the objectives, focus, and scope of its ongoing inspections in 2015 of auditors of brokers and dealers.
This year marked the first full year of inspections of broker-dealer auditors in which all of the audits inspected were governed by PCAOB standards.
The report is the first edition in a series of staff inspection briefs that will provide additional detail about the PCAOB inspection process, from scope documents to results and summaries of inspection findings.
“We have added these briefs to our outreach to auditors to inform them of areas of concern and inspection focus,” said Helen Munter, director of the PCAOB’s Division of Registration and Inspections, in a statement. “Inspections staff believes that publicly discussing our areas of current inspections focus is important to understanding audit risks and encourages auditors to improve audit quality.”
Inspection briefs can also be useful to broker-dealers, public companies, audit committees, and other audiences interested in audit quality.
The first brief outlines 2015 inspections conducted under the PCAOB interim program for auditors of broker-dealers.
Under an interim inspection program established in 2011, the PCAOB conducts inspections of registered public accounting firms in connection with their audits of broker-dealers registered with the Securities and Exchange Commission to assess compliance with professional standards, rules of the SEC and the PCAOB, and the Sarbanes-Oxley Act of 2002.
Audit and attestation engagements of broker-dealers are required to be conducted in accordance with PCAOB standards as a result of amendments to SEC Exchange Act Rule 17a-5, which became effective for broker-dealer annual reports with fiscal years ended on or after June 1, 2014.
During the 2015 inspection cycle, the PCAOB plans to inspect 75 firms that audit broker-dealers covering portions of 115 audit and attestation engagements of broker-dealers. This represents a 14 percent increase from the number of firms inspected in 2014.
In 2015, inspections staff is evaluating how firms performed on audit and attestation engagements and focusing on the examination of compliance reports and the review of exemption reports under newly applicable PCAOB standards, financial statement audit areas that had deficiencies identified in past inspections, including revenue recognition and use of information produced or used by broker-dealers, audit procedures on the supplemental schedules to the financial statements, the engagement quality review, and auditor independence.
The PCAOB said it is taking a careful and informed approach in establishing a permanent inspection program of auditors of broker-dealers. PCAOB staff is currently working toward a rule proposal for a permanent inspection program for the board to consider in 2016.
The PCAOB also recently issued an annual report on the 2014 cycle of its interim broker-dealer auditor inspection program.
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