PCAOB Report on 2017 Inspections of Broker-Dealer Auditors Shows Audit Deficiencies Remained High, While Fewer Independence Violations Were Found

Washington, DC, Aug. 20, 2018

The Public Company Accounting Oversight Board today issued a report on its inspections in 2017 of auditors of brokers and dealers that shows a continued high number of audit deficiencies overall, and fewer independence violations than in previous years. The PCAOB also issued Executive Highlights of the report.

In this inspection period, the PCAOB inspected 75 audit firms and reviewed portions of 116 audits and the related attestation engagements. Inspectors identified deficiencies at 68 of the 75 firms inspected, or 91 percent, down from 97 percent in 2016. Many of the deficiencies identified were fundamental to conducting audits, examinations, or reviews.

Audit deficiencies were identified with the highest frequency in the following areas: auditing revenue, assessing and responding to risks of material misstatement due to fraud, and auditing supplemental information for the customer protection rule.

Audit firm quality control system deficiencies were identified in areas such as exercising due professional care and performing engagement quality reviews.

Auditors of broker-dealers should read the annual report to better understand the areas where inspections found deficiencies, and evaluate their programs and procedures to prevent similar deficiencies and improve audit quality.

In addition, the Board recommends that broker-dealer owners and their audit committees discuss these results with their auditors, as this dialogue may encourage their auditors to take appropriate actions to avoid audit and attestation deficiencies.

There is more information for auditors of broker-dealers on the PCAOB website.