PCAOB Reports on Deficiencies in the Audits of Broker-Dealers

The Public Company Accounting Oversight Board ("PCAOB") identified deficiencies in the audits of broker-dealers that the PCAOB observed during its 2022 examinations of auditors.

In an Annual Report, the PCAOB highlighted several deficiencies observed when examining auditors including, among others, (i) an insufficient understanding of financial responsibility rules, (ii) an incomplete set of final examination documents and (iii) a lack of understanding of broker-dealer control processes to comply with financial responsibility rules.

To address the observed deficiencies, the PCAOB recommended that auditors implement a variety of best practices, both as to the preparation by the auditor (e.g., obtaining an understanding of the financial responsibility rules) and of the audit process (e.g., testing compliance with the net capital rule and the custody rule).