I support adoption of Attestation Standards 1 and 2 and Auditing Standard 17. Adoption of these standards is another important step in the process the Board has undertaken to carry out oversight of audits of SEC-registered broker-dealers, a responsibility assigned to the Board by Congress in the 2010 Dodd-Frank Act.
The Board has been inspecting certain SEC-registered auditors of brokers and dealers under an interim program that commenced in 2011. These new standards will establish stronger specific requirements for the audits of brokers and dealers. They provide clear guidance for auditors about how to conduct the examination of compliance reports of brokers and dealers, reviews of statements made by the broker or dealer in exemption reports outside the financial statements, and reviews and reporting on supplemental information filed with financial statements showing calculations of net capital and reserve requirements, among other things.
The new standards will enhance consumer protection by strengthening performance standards for the audit of brokers and dealers in important areas relating to financial soundness and compliance with legal requirements. These standards will be accompanied in the near future by the adoption of conforming amendments that will clarify the applicability of the PCAOB's existing professional rules, and indicate where those standards apply not only to public company auditors, but also to broker and dealer auditors.
I particularly welcome adoption of these standards for audits of brokers and dealers because the Board has been concerned about the results of its interim inspection program for auditors of SEC registered nonpublic broker dealers, currently auditing under private sector standards. These inspections have revealed serious deficiencies in many audits of brokers and dealers, and the Board hopes to communicate clearly with auditors of these entities what our standards require, and to work with these auditors to continue to improve audit quality.
Given the critical importance of brokers and dealers to capital formation in this country, any improvement in audit quality is an important improvement for investors and customers of brokers and dealers who entrust those companies with their own funds.
This has been a longstanding project of the Board, but I also want to note that the staff here at the PCAOB, with support from the SEC, has worked intensely in the past few weeks to enable us to adopt these standards and the related amendments today. We were conscious of the need to adopt the standards quickly in order to align with the recently adopted amendments to SEC Rule 17a-5 regarding financial reports of brokers and dealers, and to have the same effective date of June 1, 2014.
I would like to thank the staff of our Office of Chief Auditor, in particular Keith Wilson, Barbara Vanich, Nick Grillo, Karen Burgess and our Office of General Counsel, particularly Jennifer Williams, for their hard work on this proposal.