PCAOB Publishes Staff Inspection Brief Detailing Scope of 2017 Inspections of Auditors of Broker-Dealers

The Public Company Accounting Oversight Board today issued a staff inspection brief detailing the scope, focus, and objectives of its ongoing 2017 inspections of auditors of brokers and dealers.

In 2017, PCAOB inspectors are focusing on audit areas and attestation procedures where inspectors previously found deficiencies, including auditor independence, engagement quality reviews, and certain areas of the financial statement audit.

"The intent of these staff inspection briefs is to help audit firms, investors, and others better understand how the PCAOB approaches audit firm inspections," said Helen A. Munter, Director of Registration and Inspections.

Inspections staff is focusing on the following broker-dealer audit areas and attestation procedures in 2017:

  • Auditor independence;
  • Financial statement audit areas where deficiencies were identified in past inspections, including revenue, the assessment and response to risks of material misstatement due to fraud, financial statement presentation and disclosure, fair value measurements, and related party transactions;
  • Audit procedures on the supporting schedules to the financial statements;
  • Procedures for the attestation engagements: the examination of compliance reports and the review of exemption reports; and,
  • Engagement quality reviews.

During the 2017 inspection cycle, the PCAOB plans to inspect 75 firms that audit broker-dealers, covering portions of 115 audits and the related attestation engagements for these broker-dealers. That number includes four firms that audit more than 100 broker-dealers, 16 firms that audit 21 to 100 broker-dealers, and 55 firms that audit one to 20 broker-dealers.

Firms are selected for inspection based on various characteristics of the firms, including, among other things, the number of broker-dealer audits performed, the observations from prior inspections, and the experience of the firm and its personnel in auditing broker-dealers. In addition, some of the firms and audits are selected randomly.

The PCAOB inspects firms that perform audits of broker-dealers registered with the Securities and Exchange Commission. These inspections are intended to assess the firm's audit and attestation engagements for compliance with professional standards, rules of the SEC and the PCAOB, and the Sarbanes-Oxley Act of 2002.