PCAOB Report Highlights Audit Deficiencies
The Public Company Accounting Oversight Board released a report on the interim broker-dealer audit inspection program, which lists several significant deficiencies. PCAOB reviewed 23 audits conducted by 10 firms. It found audit procedure deficiencies related to testing for adequate financial statement disclosure, customer protection rule exemption, net capital calculations, related party transactions, revenue recognition, and control deficiencies. The report also found two instances of independence violations because the firm prepared the financial statements being audited. The Dodd-Frank Act gave authority to the PCAOB to create the inspection program.
OUR TAKE: This report really serves as a justification for the PCAOB to create the inspection program. It is also a little frightening in its implication that broker-dealer audits may not be terribly reliable.
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