Can I Use My Firm’s Public Accountant for My Broker Dealer Audit?

In response to the rampant securities fraud discovered during the financial meltdown that unfolded at the end of 2007, the United States Congress passed into law the landmark Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The historically significant federal law implemented several standards to prevent securities fraud and other types of financial crimes. As the body responsible for regulating the behavior of broker dealers, the Public Company Accounting Oversight Board (PCAOB) sets the standards for accounting firms to follow when providing broker dealer audit services.

One of the standards created and monitored by the PCAOB concerns how often broker dealers must undergo the audits conducted by firms that provide broker dealer audit services. This standard grants broker dealers some flexibility, as they should complete audits every one to four years. At Ernst Wintter & Associates, we recommend that broker dealers undergo thorough audits at least one time a year to ensure fully financial integrity. Another area of oversight for the PCAOB involves establishing the guidelines for the types of auditors that qualify to provide broker dealer audit services.

This brings up one important question for broker dealers: Can I use my firm’s public accountant for my broker dealer audit?

One of the underlying principles followed by the PCAOB when monitoring compliance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 is to ensure full compliance with the groundbreaking federal law. This means every audit provided by firms that conduct broker dealer audit services should result in the release of 100 percent accurate financial data and information. The PCAOB clearly states that full financial report compliance is not possible if broker dealers use in-house accountants to conduct audits. This means the firms that provide broker dealer audit services must be completely independent of the broker dealers that they audit.

Let’s review three common financial areas that an independent accounting from such as Ernst Wintter & Associates reviews when conducting a full audit for a broker dealer.

Financial Statements

The most important of the broker dealer audit services provided by an independent accountant concerns ensuring a client files accurate financial statements with the SEC before all mandated deadlines. Submitting accurate financial statements ensures non-profit organizations maintain their tax-exempt status, as well as helps private corporations avoid hefty fines. The key to filing accurate financial statements is to limit the number of filing exemptions.

Confirm Revenue Sources

If you have heard of the term “cook the books,” it typically refers to altering financial statements to look like an organization is financially healthy. An independent accounting firm like Ernst Wintter & Associates meticulously combs through financial statements to verify every revenue stream. For example, we verify the payments made by the customers of private businesses. In addition, we ensure that non-profit organizations do not treat the promise of donations as donations that are listed in financial statements.

Bill Payments

It is one thing to confirm every revenue stream. It is quite another to pay every bill. One of the key services provided by an independent auditor is to ensure clients pay every bill. A surprising number of both private and non-profit organizations fail to keep up with their debt obligations. From not paying rent to failing to cover loan payments, falling behind on bills is a recipe for financial disaster. The independent auditors at Ernst Wintter & Associates discover every unpaid bill to ensure our clients never fall into a deep financial hole.