Alert

CAQ ALERT #2019-01 – PCAOB REPORT ON 2018 INSPECTIONS OF BROKERS AND DEALERS

Tuesday, August 27, 2019

On August 20, 2019, the PCAOB issued its Annual Report on the Interim Inspection Program Related to Audits of Brokers and Dealers (Annual Report). Consistent with prior years, the PCAOB observed that the percentage of deficiencies for audit and attestation engagements related to brokers and dealers remained high. While the PCAOB highlighted areas in which deficiencies have decreased, they have noted increases in deficiencies in other areas of audit and attestation engagements.

The PCAOB states in the Annual Report that significant positive impact on audit quality can be achieved if:

  • Auditors focus on improving their systems of quality control;
  • Auditors advance their knowledge and understanding of PCAOB standards; and
  • Auditors focus on improving their performance in testing internal controls when employing controls-reliance audit strategies and for examination engagements.

This year’s Annual Report contains the addition of examples of procedures that based on facts and circumstances may be effective in certain areas of broker and dealer audit and attestation engagements. Included in the Appendices are metrics and information about the selection of firms and engagements for inspection, as well as historical results from the PCAOB’s inspections under the interim inspection program.

We strongly encourage auditors of brokers and dealers to read the Annual Report, along with applicable rules, standards and guidance, to help address potential risks in the 2019 audit cycle. These resources, together with those available on the CAQ Audits of Brokers and Dealers page, will help auditors better understand the areas where inspections found deficiencies, and evaluate their processes and procedures with the goal of improving audit quality.