Regulators have been clamping down on auditors of broker-dealers in recent years in response to the lack of meaningful audits of Bernard Madoff’s investment firm and other scandals uncovered during the financial crisis.
As part of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act of 2010, Congress gave the Public Company Accounting Oversight Board expanded authority to conduct inspections of audit firms that service broker-dealers. Unfortunately the PCAOB has continued to find a high number of problems with the independence of auditors and audit deficiencies in a series of reports since it gained the expanded authority (see PCAOB Finds Continuing Problems with Auditors of Broker-Dealers).
Now, a new report from Thomson Reuters examines the changes in the PCAOB’s standards for broker-dealers audits. The special report, Cause and Effect of the Changing Broker-Dealer Audit Landscape, written by Cheryl Hartfield, an executive editor in the Tax & Accounting business of Thomson Reuters, notes that under the PCAOB’s latest standards, auditors of broker-dealers must revise their audit procedures because they are now subject to the PCAOB’s rigorous standards for risk assessment, audit committee communication, engagement quality review, and engagement completion documentation.
In addition, the second edition of PPC’s Practice Aids for Audits of Broker-Dealers has been substantially revised by Thomson Reuters to reflect the new requirements. The practice aids are used in performing audits of non-public, non-carrying broker-dealers in accordance with PCAOB standards. They contain audit programs, checklists, confirmation and correspondence letters and report illustrations developed by CPAs with experience performing broker-dealer audits.