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Broker-Dealer Audits: Overcoming Costly Deficiencies in PCAOB Examinations and Avoiding Sanctions

Addressing Auditor Independence, Related-Party Transactions, SEC Net-Capital Rules, and More

Recording of a 110-minute CPE video webinar with Q&A

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Conducted on Monday, March 4, 2024

Recorded event now available

or call 1-800-926-7926

This course will provide audit professionals and advisers with practical guidance for conducting broker-dealer audits, offering tools to avoid the most common and costly risk areas in broker-dealer audits as identified in PCAOB annual inspections. The panelist will offer their experiences and practical approaches to prevent or resolve audit deficiencies.

Description

On Aug. 10, 2023, the PCAOB issued its Annual Report on the Interim Inspection Program Related to Audits of Brokers and Dealers. PCAOB stated that in prior years engagement deficiency rates were unacceptably high, and "with few notable exceptions, deficiency rates observed in 2022 inspections generally increased or remained elevated... ."

90 percent of the 50 firms examined had reported deficiencies in audit and/or attestation engagements. Of the audited statements, PCAOB inspection findings showed high deficiencies in areas including revenue, net capital supplemental information, auditors’ reports, and audit documentation.

Broker-dealer auditors are responsible for reporting to the SEC on material inadequacies and ensuring compliance with net capital and customer funds segregation rules. The SEC requires broker-dealer auditors to register with the PCAOB and be inspected regularly.

Listen as Harley Aronoff, CPA, Partner at PKF O’Connor Davies, offers practical guidance on what PCAOB inspectors are looking for and the underlying reasons certain areas are more heavily scrutinized. The program will discuss auditors' duties to maintain independence, assess risks of material misstatements due to fraud, and review the use of confirmation technology to verify statements and arrangements.

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Outline

  1. Securing your auditor and auditor credentials
  2. Broker-dealer audit inspection overview
    1. Relevant regulations
    2. Small Business Correction Act
    3. Broker-dealer audit issues
      1. Revenue
      2. Related-party transactions
  3. Best practices for audit preparation/effective pre-planning
    1. Look-back: what worked/did not from past season
    2. Problem areas to address prior to year end
    3. Planning work and discussion with auditors
    4. How to prepare for areas of audit focus
      1. Revenue
      2. Adopting new standards--for example leases
      3. Financial reporting
    5. Broker-dealer audit experiences
    6. Use of confirmation technology to detect fraud
  4. Challenges to anticipate/practical solutions
    1. Contractual support (discuss each type of revenue stream)
    2. Reconciled schedules
    3. Use of an experienced FINOP
    4. Security of support
    5. Common plan broker-dealer errors
    6. Potential fixes for errors
    7. Duties to assess risk of material misstatement due to fraud

Benefits

The panelist will review these and other key issues:

  • Understanding the areas of highest risk in broker-dealer audits
  • Identifying and avoiding the most common mistakes in broker-dealer audits
  • Establishing a system of quality control to ensure compliance with PCAOB standards
  • Addressing auditor independence

Faculty

Aronoff, Harley
Harley Aronoff, CPA
Partner
PKF O’Connor Davies

Mr. Aronoff is the Public Company Accounting Oversight Board (PCAOB) Quality Assurance Leader at PKF...  |  Read More

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