More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- Pay-to-Play Rule Violating the pay-to-play rule can result in serious consequences, and RIAs should adopt robust policies and procedures to prevent and detect contributions made to influence the selection of the firm by a government entity.
The Public Company Accounting Oversight Board adopted Thursday a bunch of new audit requirements for broker-dealers.
PCAOB adopted two attestation standards pertaining to audits of BDs designed to help protect customer funds by enhancing the quality of compliance information provided to the Securities and Exchange Commission and used in its regulatory oversight of broker-dealers.
The Board also adopted an auditing standard applicable when auditors are engaged to perform audit procedures and report on supplemental information that broker-dealers and others file with the SEC. Finally, the Board adopted related amendments to other PCAOB standards.
The Dodd-Frank Act amended the Sarbanes-Oxley Act to, among other things, authorize the PCAOB to oversee the audits of brokers and dealers registered with the SEC.
“The standards adopted today are an important step for the Board's oversight of audits of broker-dealers authorized under the Dodd-Frank Act. They will strengthen procedures for auditors and improve the reliability of annual reports required by the SEC for oversight of customer assets held by broker-dealers,” said PCAOB Chairman James Doty, in a statement.
As the PCAOB explains, the two attestation standards cover the auditor’s examination of compliance reports and the auditor’s review of exemption reports.
The requirements for BDs to prepare compliance or exemption reports, and for PCAOB-registered auditors to examine or review such reports, are new requirements included in the SEC’s recent amendments to Exchange Act Rule 17a-5. The compliance and exemption reports contain statements made by BDs regarding compliance with key SEC financial responsibility rules, including those involving the safekeeping of customer assets or with applicable conditions for exemption.
“Consistent with the requirements of Rule 17a-5, the attestation standards establish requirements for auditors examining certain statements in broker-dealer compliance reports and reviewing statements in broker-dealer exemption reports,” PCAOB said.
The supplemental information standard establishes the auditor’s responsibilities when engaged to perform audit procedures and report on supplemental information that accompanies the audited financial statements. Supplemental information includes the supporting schedules that broker-dealers are required to file with the SEC.
The Board initially proposed the attestation standards and auditing standard for supplemental information on July 12, 2011. The Board adopted these standards after consideration of comments received on the proposal and as a result of amendments made to Rule 17a-5 that were adopted by the SEC on July 30, 2013.
“Both attestation standards emphasize coordination between the examination or review engagement, the audit of the broker-dealer’s financial statements and audit procedures performed on the supplemental information,” said Martin F. Baumann, PCAOB Chief Auditor and Director of Professional Standards, in the same statement.
“This emphasis on coordination can promote overall audit effectiveness and avoid redundancy in the work performed.”