PCAOB Annual Report on 2016 Inspections of Broker-Dealer Auditors Shows Continued High Level of Audit Deficiencies

WASHINGTON, Aug. 18, 2017

The Public Company Accounting Oversight Board today issued a report on its inspections in 2016 of auditors of brokers and dealers that shows a continued high level of audit deficiencies.

PCAOB inspectors observed deficiencies at 97 percent of the firms inspected in 2016, compared to 96 percent in 2015. Deficiencies were observed in 83 percent of the audits inspected at those firms in 2016, up from 77 percent in 2015. PCAOB inspectors also observed deficiencies in 48 percent of the attestation engagements, compared to 55 percent for 2015.

"PCAOB inspectors continued to find high levels of deficiencies in the work of auditors of broker-dealers," said Helen Munter, Director of Registration and Inspections. "I hope auditors will use the information in this report to help plan and perform their audit and attestation engagements."

The annual report, the sixth issued by the PCAOB for its interim inspection program for auditors of broker-dealers, covers the 2016 inspections of 75 firms and portions of 115 audits and related attestation engagements.

Independence findings were identified at 10 percent of the inspected firms, up from 7 percent in 2015. These independence findings were noted only at inspected firms that did not audit public companies and related primarily to preparing financial statements for the audit client.

PCAOB inspectors observed that an engagement quality review was not performed at all for eight audits and the related review engagements. In addition, deficiencies in the performance of the engagement quality review were observed in 57 percent of the audits, and 20 percent and 26 percent of the examination and review engagements, respectively.

Since the interim inspection program began in 2011, the PCAOB has conducted 334 inspections of 264 firms that audit broker-dealers that covered portions of 514 audits and 233 attestation engagements.

A fact sheet on the 2016 annual report is available.