Audit Preparation Services for Broker Dealers

Broker Dealer Support ServicesWhy Mid-size brokerage firms need help preparing annual certified audits

Mid-size brokers are at a disadvantage when it comes to annual certified audits. Their competitors at large brokerage firms have Audit Committees who work throughout the year preparing for audits. These committees oversee accounting methodology and internal controls ensuring emphasis on risk management and compliance with accounting and regulatory standards. These committees function to ensure the audit goes smoothly. The committee keeps audit costs down while strengthening auditor independence and communicating with their board of directors.

Mid-sized firms don’t have the luxury of an audit committee with compliance and accounting professionals. Because of this, many broker dealer firms wind up paying high fees for audits due to miscommunication with the auditor, poorly designed or inaccurate records, lack of planning, misunderstanding of the auditors role, unanticipated auditor concerns, and any number of other audit problems.

Avoid the pain, frustration, and confusion of year end audits by allowing a professional who knows how to prepare for a successful year end certified broker audit involved in the preparation and planning at your firm.

Here’s what you can expect from our Audit Preparation Service

Accounting and Recordkeeping Process Review
Interview accounting staff and management team. Overview of accounting procedures, discuss upfront concerns by staff and management, discuss preliminary audit challenges

Review accounting system, records, and processes. This includes analyzing records such as;  FOCUS filings, Trade schedules, Clearing arrangements, Customer account documentation, Supervisory procedures, Third party vendor agreements, Branch records, Compliance standards, FINRA and SRO correspondence, and related schedules. Run preliminary tests on financial statements and schedules to determine accuracy and quantitative standards.

Analysis of Technical Accounting Issues
Review identified technical accounting and recordkeeping issues and suggest remedies where needed. Prepare corrections, disclosures, or journal adjustments to records as appropriate.

Review Internal Controls
Ensure internal controls are in compliance with standard practices that prevent fraud and identify errors before they become a problem. Review processes such as; Separation of duties, Access to accounting systems, Documentation standards, Trial balance discrepancies, Reconciliation methods, Approval and authorization standards. Prepare recommendations, corrections, disclosures, and journal adjustments as appropriate.

Analysis of Accompanying Schedules
Compile list of applicable accompanying schedules required for the audit. Verify documents needed and review for accuracy and integrity. Prepare corrections, disclosures, or journal adjustments to records as appropriate.

Assist in the preparation of GAAP Financial Statement

Reporting to Executives
Make recommendations for management discussion and analysis (MD&A). Report findings to executive directors with supporting documentation and make recommendations to implement corrective action plans. Provide additional insight to firm where appropriate including recommendations for business practices, compliance policies, risk management, cybersecurity standards, tax planning, and other regulatory concerns.

Provide final checklist of documents needed for audit compilation. Generate supporting schedules or disclosures resulting from audit preparation service.

Act as liaison between auditor and firm where appropriate; maintaining availability to answer technical questions and provide feedback on records and processes.



High Cost of AuditsCan your existing accounting and compliance team handle all of that in time for year-end?

We’re here to help. Let us handle the audit preparation plan for your firm and help keep your brokerage out of audit trouble.

Save your business from; High Audit Costs, Frustration, Work Overload, Negative Audit Opinions, A Lengthy Audit Process, Unusually High Number of Auditor Questions, and many more complications due to a bad audit experience. 

Call our office at (818) 657-0288 for a quote on Audit Preparation Services or for more information. Or contact us by email


We Know the Rules for Certified Broker Dealer Audits

In the past firms would rely on auditor firms to prepare financial statements and make adjusting journal entries for accuracy. No more. Industry rules dictate that the auditor preparing your certified audit must maintain independence. The auditor is restricted from any responsibility in preparing the financial statements.

This places firms without sophisticated accounting and recordkeeping systems at a disadvantage costing them time and money revising accounting records, systems, and compiling data for a seemingly endless stream of questions triggered as a result of incomplete, inefficient, or inaccurate records.

SEC and PCAOB audit standards prohibit auditors from being involved in internal tasks, bookkeeping, services related to accounting, record-keeping, or financial statements. 

Independence rules require that the auditor shall not:

  • Make management decisions for the BD
  • Act as part of the BD’s internal systems and accounting processes
  • Assist with financial statements, footnotes, or preparation

What the Certified Auditor Does Do

The auditor is engaged to render an opinion on whether a company’s financial statements are presented fairly, in all material respects, in accordance with financial reporting standards.

To form the opinion, the auditor gathers appropriate and sufficient evidence and observes, tests, compares, and confirms until gaining reasonable assurance. The auditor then forms an opinion of whether the financial statements are free of material misstatement, and if inconsistencies are due to fraud or error.

What Records Are Required for the Annual Certified Broker Dealer Audit?

Financial reports, statements and supporting schedules prepared in accordance with GAAP and in a format consistent with the FOCUS report (Financial and Operational Combined Uniform Single Report)

Financial statements compiled

  • Statement of financial condition
  • Statement of operations (Profit or Loss)
  • Statement of change in stockholders, partners, or sole proprietor equity
  • Statement of liabilities subordinated to claims of general creditors

Supporting schedules compiled

  • Computation of Net Capital under SEC rule 15c3-1
  • Computation for Determination of the Reserve Requirements under SEC rule 15c3-3
  • Information Relating to the Possession or Control Requirements under SEC rule 15c3-3
  • Reconciliation of Net Capital computation (Rule 15c-1)
  • Computation of Reserve Requirements (Rule 15c3-3)

Additional Requirements
A compliance report or an exemption report
The independent public accountants report
Supplemental Securities Investor Protection Corporation (“SIPC”) reconciliation
Notarized oath or affirmation


Need Help with Compliance? Setting up a New Broker Dealer, Updating Procedures and Policies, Difficulty Staying on top of Registration, and more…  Visit our Broker Dealer Services menu for more ways we can help.