Alert Highlights Big Changes for Audits of Broker-Dealers
A member alert issued on Monday by the Center for Audit Quality (CAQ) and the American Institute of CPAs (AICPA) outlines a handful of regulatory changes for audits and attestation engagements of brokers and dealers and futures commission merchants, including those that are dually registered, effective on June 1.
The alert is intended to remind audit firms of certain auditing considerations in response to regulatory changes from the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), as well as related guidance and standards issued by the Public Company Accounting Oversight Board (PCAOB).
“Several significant regulatory changes will soon go into effect that are critical to the auditor, and this document is an example of the profession looking forward in preparing for such changes,” CAQ Executive Director Cindy Fornelli said in a written statement.
The alert suggests that “auditors should discuss the changes with their broker-dealer and futures commission merchant clients and assess which changes are applicable based on the operations of the entity being audited and the regulatory agencies with which the entity is registered.”
The new amendments represent significant areas of change as they relate to the annual reporting requirements of broker-dealers and futures commission merchants. The following are addressed in the joint CAQ/AICPA alert:
- SEC amendments to Rule 17a-5
- PCAOB Attestation Standard No. 1, Examination Engagements Regarding Compliance Reports of Brokers and Dealers
- PCAOB Attestation Standard No. 2, Review Engagements Regarding Exemption Reports of Brokers and Dealers
- PCAOB Auditing Standard No. 17, Auditing Supplemental Information Accompanying Audited Financial Statements
- CFTC customer protection rules for futures commission merchants
- CFTC-registered introducing brokers
It also highlights related resources and programs, such as the PCAOB Inspection Program and its forums on auditing smaller broker-dealers, as well as the AICPA Stockbrokerage and Investment Banking Expert Panel, which addresses regulatory matters from the broker-dealer industry perspective.
“The AICPA is committed to activities that enhance audit quality and has been a leader assisting practitioners in achieving that goal,” AICPA President and CEO Barry Melancon, CPA, CGMA, said in a written statement. “This member alert, part of a professionwide effort to identify ways to boost investor confidence in the integrity of audited financial statements, will help auditors of brokers and dealers and futures commission merchants navigate recent regulatory changes.”
The new rules addressed in the alert are generally effective for audits and attestation engagements of broker-dealers and futures commission merchants with fiscal years ending on or after June 1, 2014. Other changes in the rules have effective dates prior or subsequent to June 1, but the alert is intended to address the major changes effective at the start of next month.