PCAOB Says Audits of Broker-Dealers Improved, But Deficiencies Remain High

By:
Chris Gaetano
Published Date:
Aug 20, 2021
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The Public Company Accounting Oversight Board (PCAOB), in a recent report, said that audits of broker-dealers improved significantly in 2020, but the improvement still wasn't enough, as the overall number of deficiencies remains high. 

PCAOB inspectors examined 105 audits at 65 firms. Of these 105 audits, there were 64 with deficiencies: 27 with both audit and attestation deficiencies, and 37 with just audit deficiencies.

This represents a significant improvement from last year. However, the PCAOB noted that there are still major issues with the audits. The number of firms that had one or more audit and/or attestation engagements with deficiencies showed a 14 percent drop from 2019 but remained high as a percentage of firms inspected (78 percent). The number of audit engagements with deficiencies declined by15 percent from 2019 levels but remained high as a percentage of engagements reviewed (61 percent), primarily due to deficiencies in auditing revenue. The percentage of examination engagements with deficiencies declined slightly to 67 percent of engagements reviewed from 69 percent in 2019 but remained high, primarily due to deficiencies in testing internal control over compliance. 

One exception was review engagements. The percentage of those with deficiencies declined to 23 percent of engagements reviewed from 51 percent in 2019. 

As in other years, the board observed that the more that firms perform audits of broker-dealers, the better they generally are at them. For those that audited more than 100 broker-dealers, the percentage of audit engagements with deficiencies declined from 41 percent in 2019 to 38 percent in 2020 . For all other firms, the percentage of audit engagements with deficiencies declined from 84 percent in 2019 to 71 percent in 2020 .

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