Broker-dealers continue to show deficiencies in financial statement audit areas similar to previous inspection cycles, including revenue recognition, financial statement presentation and disclosures, and the assessment of risks of material misstatement due to fraud, according to a just-released Public Company Accounting Oversight Board report.
The Dodd-Frank Act amended the Sarbanes-Oxley Act to, among other things, give the PCAOB oversight authority for the audits of broker-dealers registered with the Securities and Exchange Commission.
PCAOB staff inspected 75 firms in 2016 covering 115 audit and attestation engagements. The selected audit and attestation engagements were for fiscal years that ended during the period from June 30, 2015, through June 30, 2016.
Helen Munter, director of PCAOB’s registration and inspections, said in a statement releasing the report that the “preview of 2016 inspection results may benefit auditors of broker-dealers as they plan and perform future audits.”
Inspections staff stated that they continued to observe instances in which “independence appeared to be impaired because the auditors were involved in the preparation of the financial statements or performed bookkeeping or other prohibited services related to the accounting records of their broker and dealer clients.”
Auditors must be independent of their audit clients throughout the audit and professional engagement period, PCAOB stated.