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Deficiencies High in Audits of Broker/Dealers, PCAOB Finds

Almost nine in ten audits of broker/dealers examined in 2014 had deficiencies, according to a new Public Company Accounting Oversight Board report, and almost a quarter had independence issues.

The annual report on the board’s interim inspection program covers inspections in 2014 of audits performed for fiscal years ended on or before May 31, 2014.

Among the findings:

  • Board staff identified independence findings in 26 of 106 audits selected for inspection.
  • They found audit deficiencies at each of the 66 firms inspected, and in 87 percent of audits selected.

The independence findings primarily related to assisting with the preparation of financial statements, while the PCAOB inspections staff found “frequent” audit deficiencies in revenue recognition, reliance on records and reports, fair value accounting estimates, and financial statement presentation and disclosure.“Although findings and deficiencies were identified across all types of audit firms,” the report noted, “firms that did not also audit issuers were noted to have a higher percentage of findings and deficiencies than firms that also audited issuers.”"We have been urging firms that audit broker-dealers to re-examine their audit approaches due to ongoing issues identified during inspections," said Robert Maday, PCAOB deputy director of the Division of Registration and Inspections and program leader of the Broker-Dealer Audit Firm Inspection Program.

The board plans to increase the number of firms inspected by 14 percent in 2015, and is working toward establishing a permanent inspection program.

 

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