February 27, 2021

PCAOB Official Doesn’t Want Anyone To Freak Out But Holy Schnikes, Broker Dealer Audits Are Bad

If you read the PCAOB's press release on its annual inspection of broker-dealer audits, you sense disappointment:

For inspections conducted in 2014, PCAOB staff identified independence findings in 26 of the 106 audits selected for inspection, primarily related to assisting with the preparation of financial statements. Twenty of those audits were performed by firms that did not also audit public companies or other issuers.

Inspections staff identified audit deficiencies at each of the 66 firms it inspected in 2014 under the interim program and in 87 percent of the audits selected for inspection. Seven firms, of which five also audited issuers and were thus subject to regular inspection by the PCAOB, performed the audits where Inspections staff did not identify any deficiencies in the portions of audits inspected.

"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.

Like, "Jeez, guys. We've asked you to try a little harder and we just aren't seeing it."

Compare that to this quote from the Journal where Deputy Director Maday straight-up says, "WE'RE VERY DISAPPOINTED IN YOU."

“It’s disappointing that we continue to have such high percentages of audit deficiencies,” said Robert Maday, program leader of the broker-dealer audit firm inspection program at the PCAOB. “I don’t want to be alarming but, at the same time, it’s important to note that there is a problem here and it’s important that these auditors improve their work.”

Yeah, and you're scaring them, guys. Get it together.

PCAOB Annual Report on Inspections of Broker and Dealer Auditors Continues to Show High Levels of Independence Findings and Audit Deficiencies [PCAOB]
Audits of Broker-Dealers Remain Troubling to Government Watchdog [CFOJ]

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