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Broker-Dealer Audits: Overcoming Costly Deficiencies in PCAOB Examinations and Avoiding Sanctions

Addressing Auditor Independence, Related-Party Transactions, SEC Net-Capital Rules, and More

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Tuesday, April 28, 2020

Recorded event now available

or call 1-800-926-7926

This course will provide audit professionals and advisers with practical guidance for conducting broker-dealer audits, offering tools to avoid the most common and costly risk areas in broker-dealer audits as identified in PCAOB annual inspections. The panel will offer their experiences and practical approaches to prevent or resolve audit deficiencies.


On Aug. 28, 2019, the PCAOB issued its Annual Report on the Interim Inspection Program Related to Audits of Brokers and Dealers. As in prior years, PCAOB noted material deficiencies that occur year after year in broker-dealer audits. In particular, the Board emphasized auditors should focus on improving their systems of quality control and gain a better understanding of PCAOB standards.

Audit deficiencies were found in the financial statements and supporting schedules, auditor independence, and in auditing internal controls. Of the 105 audit engagements examined, only 25 (24 percent) had no reported audit deficiencies.

PCAOB inspection findings included materiality thresholds that were too high, and that would not detect material misstatements, sample sizes that were too small, and engagement reviewers who lacked adequate experience. The PCAOB will continue scrutiny of financial statement areas with recurring deficiencies, including audit procedures for related-party transactions.

Broker-dealer auditors are responsible for reporting to the SEC on material inadequacies and ensuring compliance with net capital and customer funds segregation rules. The SEC requires broker-dealer auditors to register with the PCAOB and be inspected regularly. These supporting schedules must be audited under AS 2701.

Listen as our panel of broker-dealer audit experts offers practical guidance on what PCAOB inspectors are looking for and the underlying reasons certain areas are more heavily scrutinized. The program will discuss auditors' duties to maintain independence, assess risks of material misstatements due to fraud, and the use of confirmation technology to verify statements and arrangements.



  1. Securing your auditor and auditor credentials
  2. Broker-dealer audit inspection overview
    1. Relevant regulations
    2. Small Business Correction Act
    3. Broker-dealer audit issues
      1. Revenue
      2. Related-party transactions
  3. Best practices for audit preparation/effective pre-planning
    1. Look-back: what worked/did not from past season
    2. Problem areas to address prior to year end
    3. Planning work and discussion with auditors
    4. How to prepare for areas of audit focus:
      1. Revenue
      2. Adopting new standards--for example leases
      3. Financial reporting
    5. Broker-dealer audit experiences[A1]
    6. Use of confirmation technology to detect fraud
  4. Challenges to anticipate/practical solutions
    1. Contractual support (discuss each type of revenue stream)
    2. Reconciled schedules
    3. Use of an experienced FINOP
    4. Security of support
    5. Common plan broker-dealer errors
    6. Potential fixes for errors
    7. Duties to assess risk of material misstatement due to fraud


The panel will review these and other key issues:

  • Understanding the areas of highest risk in broker-dealer audits
  • Identifying and avoiding the most common mistakes in broker-dealer audits
  • Establishing a system of quality control to ensure compliance with PCAOB standards
  • Addressing auditor independence


Abdulali, Batul
Batul Abdulali

Senior Audit Manager
Assurance Dimensions

Ms. Abdulali manages audits for public reporting companies in the beverage, IT, telecommunications, oil and gas, and...  |  Read More

Harley Aronoff, CPA
Harley Aronoff, CPA

Co-Founder / Managing Partner
Blue Diamond Audit Consulting

Former PCAOB inspector and broker-dealer industry technical expert, Mr. Aronoff, co-founded the firm after recognizing...  |  Read More

McNamara, Matthew
Matthew C. (Matt) McNamara, CPA, CISA

Managing Partner
Assurance Dimensions

Mr. McNamara has been practicing as a CPA for 19 years. He began his career at two of the world’s largest...  |  Read More

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