Concerns raised by PCAOB over the quality of Broker-Dealer PCAOB Inspections

At the recent 2018 AICPA Banking and Savings Conference, Jim Kaiser, Board Member at the PCAOB, addressed PCAOB’s concern over the 2017 inspection results for the Broker-Dealer community. Mr. Kaiser explained that 79% of the broker-dealer registrants inspected for 2017 failed inspection. While this is an improvement to the 87% failure rate in the 2016 inspection, it is still extremely high compared to other industries. As such, the PCAOB believes that most firms are still quite far from where they need to be regarding these audits. PCAOB acknowledged that the majority of the recent failures occurred at auditing firms that had not been previously inspected for broker-dealer clients. Firms that had been previously inspected seemed to perform better, although even for these firms, failures were still quite prevalent.

In an effort to help firms improve results, the revamped Board of the PCAOB is developing a new Strategic Plan that is focused on collaboration, transparency, and outreach. As part of this plan, the Board recognized that the high level of failures on broker-dealer inspections is likely due to a lack of appropriate guidance from the PCAOB. In response to this, the PCAOB will be publishing webinars and opening new forums directed at the broker-dealer industry at no cost, in order to provide firms and registrants with more clarity and guidance.

In addition to supplying webinars and public forums, the PCAOB will soon be offering an interim inspection program for auditing firms in which the PCAOB will perform all procedures that would be performed under a formal inspection. There would be no report issued for this interim inspection, but firms would be provided with valuable feedback on where they stand, prior to year-end, in order to make adjustments and improvements as necessary. While the PCAOB hopes to implement this new interim inspection program in the near-term, no formal timeline has been set as of September 2018.

If you have any questions regarding your inspection or how it may impact your organization, please reach out to, Andres Garzon (617-306-1888, agarzon@cfgi.com) or Matt Pantera (508 625-0172, mpantera@cfgi.com).

Further information from the PCAOB, including access to current webinars and public forums, can be found at the PCAOB’s website by following this link: https://pcaobus.org/Pages/BrokerDealers.aspx