The audit firms that examine U.S. broker dealers continue to suffer from a high number of independence issues and audit deficiencies, according to the U.S. Public Company Accounting Oversight Board (PCAOB).
In its latest report on its inspections of auditors that examine registered broker-dealers, the PCAOB says that it identified audit deficiencies, or independence issues, in 56 of the 60 audit firms inspected, and in 71 of the 90 audits inspected. While the percentage of audits with inspection issues was slightly lower than in previous inspections, the PCAOB expressed concern over the nature and number of these continuing issues.
“Many of the observations noted during 2013 have not changed from prior inspections and relate to fundamental auditing principles,” said Robert Maday, deputy director of the division of registration and inspections and program leader of the broker-dealer firm inspections program.
The PCAOB reports that audit deficiencies were found in portions of 70 of the 90 audits that it looked at; and, that independence issues were found in 21 on the 90 audits, where firms helped with the bookkeeping or preparation of the financial statements they audited, which is contrary to SEC rules.
“We again urge firms that audit broker-dealers to re-examine their audit approaches and we remind firms that independence rules applicable to broker-dealer audits prohibit bookkeeping or financial statement preparation by the auditor,” Maday added.
The PCAOB also says that its inspectors saw a high percentage of issues with the audit firms it reviewed, whether or not the firm audited public companies, and regardless of how many broker-dealer audits they performed. It also says that the number of findings were high for the broker-dealer audits it looked at, regardless of the broker’s reported net capital, revenues and assets.
Its inspections of brokers’ auditors for 2014 are well underway, the PCAOB says. It plans to inspect approximately 60 audit firms covering portions of about 100 audits.