Fact Sheet: PCAOB Standards for Broker-Dealer Auditors  

The Board adopted attestation standards pertaining to audits of brokers and dealers, an auditing standard for supplemental information accompanying financial statements audited according to PCAOB standards, and related amendments to other PCAOB standards.

These standards are intended to enhance the quality of broker-dealer compliance information provided to the SEC and used in its regulatory oversight, which is important for the protection of customers who entrust their cash and securities to broker-dealers.

The Dodd-Frank Wall Street Reform and Consumer Protection Act amended the Sarbanes-Oxley Act to, among other things, authorize the PCAOB to oversee audits of broker-dealers registered with the U. S. Securities and Exchange Commission (SEC). Specifically, the Dodd-Frank amendments provided the Board with authority to carry out oversight responsibilities for audits of broker-dealers, including inspections, standard setting, investigations and disciplinary proceedings.

On July 30, 2013, the SEC amended its Rule 17a-5 to enhance safeguards for customer assets held by broker-dealers. The amendments include a requirement that broker-dealers file annual financial reports with the SEC that are audited in accordance with PCAOB standards. Additionally, the SEC adopted requirements for new compliance and exemption reports that are covered by an auditor's report prepared in accordance with PCAOB standards.

The PCAOB adopted two attestation standards that cover the auditor's examination regarding compliance reports and the auditor's review regarding exemption reports of broker-dealers. The Board also adopted a new standard for auditing supplemental information that accompanies the financial statements.

Subject to SEC approval, the standards will become effective for audits of financial statements for fiscal years ending on or after June 1, 2014, to coincide with the effective date for the broker-dealer reporting requirements recently issued in the SEC Rule 17a-5 amendments.

Attestation Standards

The Examination Standard: Attestation Standard No. 1, Examination Engagements Regarding Compliance Reports of Brokers and Dealers, establishes requirements for the auditor's examination of certain statements in broker-dealer compliance reports.

Consistent with SEC Rule 17a-5, the examination standard requires auditors to obtain sufficient appropriate evidence to opine on a broker-dealer's statements in its compliance report as to whether:

Additionally, the examination standard provides requirements for auditors that:

Review Standard: Attestation Standard No. 2, Review Engagements Regarding Exemption Reports of Brokers and Dealers, establishes requirements for the auditor's review of the statements in broker-dealer exemption reports.

Consistent with SEC Rule 17a-5, the review standard requires auditors to obtain moderate assurance about the following statements in the broker-dealer's exemption report:

AS No. 17: Supplemental Information

Auditing Standard No. 17, Auditing Supplemental Information Accompanying Audited Financial Statements, establishes the auditor's responsibilities when performing audit procedures and reporting on supplemental information that accompanies the audited financial statements of broker-dealers and others, such as certain employee benefit plans that must file with the SEC audited financial statements and schedules prepared in accordance with certain financial reporting requirements of the Employee Retirement Income Security Act of 1974.

Supplemental information is often required by regulators for oversight purposes. AS No. 17 is intended to give the SEC and other users greater confidence in the quality and consistency of
supplemental information accompanying audited financial statements of broker-dealers and others. In addition to supplemental information provided by broker-dealers, the standard may be used for other types of supplemental information specified by the standard.

The standard includes auditor performance requirements to:

When accompanying audited financial statements, the term "supplemental information" refers to:


Next Steps for Broker-Dealer Audits