The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 designated the Public Company Accounting Oversight Board as the regulatory agency responsible for overseeing the audits of all broker dealers registered with the Securities and Exchange Commission. Over the past 7 years, the PCAOB has performed extensive reviews of audit files, scrutinizing independence, documentation procedures and the general effort put forth by the audit community to ensure the reports issued present an accurate, complete and fair representation of the financial position of each member firm.
In instances where the PCAOB has determined that the auditors failed to properly fulfill their responsibilities, fines have been levied and suspensions have been invoked against the audit firms. The severity of failing to establish and execute a near perfect audit program has created a perpetual fear that has pervaded the audit community and has resulted in many small audit firms opting to delist themselves from performing broker dealer audits. For those audit firms who remain actively engaged, the level of due diligence to certify an audit, and the time commitment to ensure they are protected from the PCAOB, has resulted in significant fee increases within the industry.
For certain broker dealers, possession of customer funds and their obligation to the investing public, may legitimatize the scrutiny of PCAOB, as the overall objective of this legislation was to restore trust in the financial services sector. For the vast majority of broker dealers, who do not hold customer funds or often do not do business with the general public, the increased scrutiny and increased costs have resulted in undue hardship for minimal substantiated value.
While ACI does not have any ability to mitigate the audit requirement for our broker dealer clients, we have spent a considerable amount of time and effort to assist with alleviating the obligations of the broker dealer during this annual process. Our recent effort to convert the fiscal year end away from December 31st has been very successful. Auditors are generally less busy during the off-calendar year-end, which has often resulted in broker dealers receiving a higher quality audit at a lower cost. We have actively communicated with our contacts at FINRA and have repeatedly been successful in facilitating our goal of ensuring our broker dealer clients comply with their regulatory requirements in the most time efficient and cost effective manner possible.
If you would like to learn more about how ACI can help your firm with this process, please contact Jay Gettenberg at (212) 668-8700, extension 25 or email us at firstname.lastname@example.org.