BD Audits | PCAOB member

PCAOB finds recurring problems with BD Audits

Almost nine in ten audits of broker-dealers examined in 2014 had deficiencies, according to the recent Public Company Accounting Oversight Board report, and almost a quarter had independence issues. With this in mind, the board plans to increase the number of firms inspected by 14 percent in 2015, and is working toward establishing a permanent inspection program.

Robert Maday, PCAOB program leader for Broker-Dealer Audit Firm Inspections urges broker dealer audit firms to re-examine their audit approaches due to ongoing issues identified during inspections.

Annual report results at December 2014 show that of 106 audits, 26 had independence findings; and there were audit deficiencies in all of the 66 firms inspected.

What are the key areas of concern?

Financial Statement Deficiencies: A deficiency, as defined by the PCAOB, means the audit firm hadn’t obtained enough evidence to support its approvals of a company’s financial statements and internal controls. Among types of deficiencies in statements related to controls are; a deficiency in design, a deficiency in operation, a significant deficiency, a material weakness leading to a reasonable possibility that a material misstatement is not detected.  


Auditor independence:  PCAOB Rule 3520 –

 A registered public accounting firm and its associated persons must be independent of the firm’s audit client throughout the audit and professional engagement period. The rule safeguards auditors independence, objectivity and professional skepticism through mandatory rotation of audits. Additionally, the rule helps limit pressure on auditor’s to develop and protect long-term client relationships to the detriment of investors and capital markets.

Important Considerations

Audit rules and the SEC exchange act rule 17a-5: Audit and attestation engagements of brokers and dealers are now required to be conducted in accordance with PCAOB standards relevant to Exchange Act Rule 17a-5 (“Rule 17a-5”) that became effective for broker and dealer annual reports with fiscal years ended on or after June 1, 2014. What does this mean?  The SEC now requires broker-dealer audits be conducted in accordance with PCAOB standards, which require the auditor be independent of the CPA who prepares the financial statements and cannot be the same auditor who files the SEC audit report.


Looking forward to 2015 here is what we can expect from PCAOB inspections –

In an ongoing effort to identify focus areas for PCAOB inspections, the PCAOB released a staff inspection brief outlining the focus of 2015 PCAOB inspections:

  • The examination of compliance reports and the review of exemption reports under newly applicable PCAOB standards, 
  • Financial statement audit areas that had deficiencies identified in past inspections, including revenue recognition and use of information produced or used by broker-dealers, 
  • Audit procedures on the supplemental schedules to the financial statements, 
  • The engagement quality review, and 
  • Auditor independence.

Need help with your Broker-Dealer Audit?  Reach out to Dave Banerjee, CPA  for certified PCAOB audits. 

RND Resources, Inc. has a suite of services for broker-dealers. Whether you are starting a broker-dealer for the first time or have an existing firm that needs support, we are equipped with expertise.

Integrate business planning, compliance, operations, trading, and registration.

  • Full Service Brokerage Support
  • On-Site Audit Services
  • Expert Regulatory Consulting
  • Customized Compliance Programs

Contact us for details (818) 657-0288 or email.

Download our PCAOB Audits Newsletter

BD Audits | PCAOB member

Free Webinar: CPA Audits for FINOPS

Due to popular demand of our June webinar, “FINOPS Guide to PCAOB Audits,” we are revisiting the subject for further elaboration. On Thursday, November 20th, Dave Banerjee, CEO of RND Resources will be presenting a free webinar entitled, “CPA Audit for FINOPS.”

You can expect detailed advice regarding:

1. Summary of changes to the PCAOB Audit of Broker Dealers.
2. Increased audit requirements arising from the above changes and the burden of evidence required.
3. How to extract value for the audit process and keep costs down.

Date: Thursday, 11/20/2014
Time: 12:15 PST

Registration URL:
Webinar ID: 153-584-939

The Upcoming SEC and FINRA Cybersecurity Sweeps. Is Your Firm Ready?

Because of all of the sensitive financial information that RIA’s, Broker Dealers and Banks keep regarding their clients, internet security has become a major concern for the wealth management industry. As, hacking techniques are growing more sophisticated, it is hard to tell who could be observing your connection and Internet activity. Due to this cyber-threat the SEC and FINRA will be conducting cybersecurity sweeps of the wealth management industry to make sure you are up to date and taking the latest precautions to protect your clients.

Why Hackers Target RIAs and Financial Firms

Bank account numbers and social security numbers are not the only thing hackers are looking to steal. Many hackers and rogue traders are hijacking trading accounts from financial firms and making unauthorized trades, as well as stealing funds.

How the SEC and FINRA Cybersecurity Sweeps Will Work

The SEC and FINRA are aware of these potential security threats and want the industry to get prepared. They have announced that this year they are planning random sweeps to test the defenses of various firms. If a firm’s cybersecurity is not up to the job, the SEC and FINRA could levy large fines as punishment for the oversight.

The SEC and FINRA will also be checking to see that firms have adequate written policies and measures for cybersecurity, a schedule of periodic tests for weaknesses in the system, and a history of fixing weaknesses in their cybersecurity. If your firm fails in any of these categories, you could be liable for a large fine.

What Your Firm Needs to Do to Prepare

The SEC and FINRA cybersecurity requirements are fairly exhaustive and could catch many firms off guard, especially smaller firms that might not have full-time tech support. If you are worried that you may have a security gap, you could try working with a third party that specializes in this type of compliance. These firms have studied the upcoming requirements and can you give a checklist of the measure you need in place in case of a sweep.

We encourage you to join our free webinar, entitled “Cybersecurity for Financial Services Firms” on July 9th where we will be discussing the procedures you need to get ready. Preparing for the SEC and FINRA cybersecurity sweeps will take some work, but it’s a fraction of the headache of dealing with a serious breach.

Reserve your Webinar seat now at: