PCAOB, GAAS and Broker-Dealers
The SEC has issued interpretive guidance regarding the meaning of the term “generally accepted auditing standards” (“GAAS”) after adoption of the Dodd-Frank Act. Section 982 of the Dodd-Frank Act amended the Sarbanes-Oxley Act of 2002 to authorize the Public Company Accounting Oversight Board (“PCAOB”), among other things, to establish, subject to approval by the SEC, 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 SEC pursuant to Rule 17a-53 under the Exchange Act. The amendments directly impact certain SEC rules, regulations, releases, and staff bulletins related to brokers and dealers and certain provisions in the federal securities laws for brokers and dealers, which refer to GAAS and to specific standards under GAAS (including related professional practice standards). 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 SEC.
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. In addition, the PCAOB has not yet revised its rules, which currently refer only to issuers (i.e. public companies), to require registered public accounting firms to comply with PCAOB standards for audits of non-issuer brokers and dealers. As a result, the SEC is providing transitional guidance with respect to its existing rules regarding non-issuer brokers and dealers. Specifically, the SEC stated references in SEC 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, plus any applicable rules of the SEC. The SEC intends, however, to revisit this interpretation in connection with its rulemaking project referenced above.
Check dodd-frank.com frequently for updates on the Dodd-Frank Act.
Contact Steve Quinlivan for more information.