PCAOB Proposes Rules Regarding Auditing Standards for Broker-Dealers

The Public Company Accounting Oversight Board ("PCAOB") has filed two separate releases with the SEC proposing rules regarding examination and compliance reports for broker-dealers pursuant to the Sarbanes-Oxley Act.

In the first release, the PCAOB proposed rules on Attestation Standard No. 1 ("Examination Engagements Regarding Compliance Reports of Brokers and Dealers"), and Attestation Standard No. 2 ("Review Engagements Regarding Exemption Reports of Brokers and Dealers"), as well as related amendments to the PCAOB standards. Both of the proposed attestations focus on auditor review of a broker-dealer's systems to comply with the capital and custody rules, as well as related recordkeeping requirements. (The "exemption" referred to in the second attestation is the exemption from the safekeeping requirements of the custody rule for broker-dealers who do not hold customer assets. See generally the Custody Chapter of the Broker-Dealer Guide.) The standards set forth a framework of specific procedures that are required for auditors to provide an appropriate level of assurance on a broker-dealer's statements that a broker-dealer's systems and procedures are sufficient to comply with the financial rules applicable to it.

In the second release, the PCAOB proposed rules on Auditing Standard No. 17 ("Auditing Supplemental Information Accompanying Audited Financial Statements") and related amendments to PCAOB Standards. Auditing Standard No. 17 requires auditors to perform certain audit procedures when engaged to audit and report on the "supplemental information" accompanying financial statements. The documents that constitute "supplemental information" are defined in Appendix A, which starts at the bottom of page 10 of the relevant release.

See: Text of Attestation Standard No. 1 and No. 2 Proposed Rule; Text of Auditing Standard No. 17 Proposed Rule.Related news: SEC Extends No-Action Relief under Advisers Act Custody Rule (November 6, 2013).