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February 6, 2023

Auditors of Broker-Dealers Are Letting Us All Down

COME ON, YOU GUYS. You're making EY look really good and that is no small feat. Here's what PCAOB Member Jay Hanson had to say during the call with reporters about the Board's second progress report on interim inspection program for broker and dealer auditors: 

“The number of firms and audits inspected are greater than those we reported on last year, but the inspection results are similar and, in one word, disappointing,” said PCAOB member Jay Hanson during a conference call with reporters Monday. “We observed deficiencies in all of the firms inspected. Because a number of the firms inspected also audit issuers, some of the firms covered in this report are already subject to PCAOB inspections of issuer audits, which includes all of the large firms that we inspect annually in connection with our regular inspections of issuer audits, and 10 firms that we inspect once every three years. Of the firms inspected, 24 do not audit issuers, and, therefore, this is their first experience with a PCAOB inspection. The results point to a need for the firms we inspected to improve their performance, which will require focused effort and a desire to improve.”

Anyone want some of the gory details? You got it! Here's some stats from the "Independence Findings" in the Board's Fact Sheet:

Inspections staff found that, contrary to the requirements of SEC independence rules, some auditors were involved in the preparation of the financial statements that they audited. 
Independence findings were identified: 
  • in more than one-third (22 of 60) of the audits selected for inspection.
  • in approximately 80 percent of the audits selected for inspection that were performed by firms that audited brokers and dealers but did not audit issuers.
  • in approximately eight percent of the audits selected for inspection that were performed by firms that audited brokers and dealers and also audited issuers.

Overall, the firm looked at 43 firms that covered 60 audits of broker-dealers registered with the SEC and the Board will inspect even more firms for next year.

During 2013, the board plans to inspect approximately 60 audit firms covering portions of about 90 audits. The PCAOB expects that, by the end of 2013, the interim inspection program will include inspections of portions of more than 170 audits of brokers and dealers conducted by approximately 100 registered public accounting firms.
So expect great things next year. Check out the full report on the next page and discuss this latest low point for auditing.

PCAOB Broker-Dealer Audit Report Aug 19 2013

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