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SEC Issues Guidance on Dodd-Frank Authorization of PCAOB Oversight of Auditors of Brokers

By Jim Hamilton

In one of its post-Madoff reforms, the Dodd-Frank Act authorized the PCAOB to inspect and examine the auditors of broker-dealers. Section 982 of the Act authorized the Board to 2establish, subject to SEC approval, auditing and related attestation, quality control, ethics, and independence standards to be used by registered public accounting firms with respect to the preparation and issuance of audit reports to be included in broker and dealer filings with the 

Commission pursuant to Rule 17a-53 under the Exchange Act.  The changes directly impact some Commission regulations, releases, and staff bulletins related to brokers and dealers. The changes worked by Dodd-Frank also impact p00rovisions in the federal securities laws for brokers and dealers, which refer to Generally Accepted Auditing Standards (?GAAS?) and to specific standards under GAAS (including 

related professional practice standards. 

The SEC said that there may be confusion on the part of brokers, dealers, auditors, and investors with regard to the professional standards auditors should follow for reports filed and furnished by brokers and dealers pursuant to the federal securities laws and the rules of the 

Commission.  Thus, while the SEC is considering a rulemaking project to update the audit and related attestation requirements under the federal securities laws for brokers and dealers, particularly in light of the Dodd-Frank Act, the SEC has provided transitional guidance with respect to its existing rules regarding non-issuer brokers and dealers. Specifically, references in Commission rules and staff guidance and in the federal securities laws to GAAS or to specific standards under GAAS, as they relate to non-issuer brokers or dealers, should continue to be understood to mean auditing standards generally accepted in the United States of America,7 plus any applicable rules of the Commission.  

The Commission intends, however, to revisit this interpretation in connection with its rulemaking project referenced above. 

 

Full post as published by Jim Hamilton's World of Securities Regulation on September 27, 2010 (boomark / email).