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Registration and Inspection of the Auditors of Broker-Dealers 

As part of the Dodd-Frank Act, lawmakers granted broad new authority to the Public Company Accounting Oversight Board (PCAOB) to expand its mission beyond auditors of public companies.  Under the Act, the PCAOB has the authority, by rule, to set up an inspection regime for auditors of broker-dealers.  In the rule, the PCAOB may choose specific classes of broker-dealer auditors or mandate that all auditors of all broker-dealers be subject to inspection and registration.  Lawmakers have explicitly indicated to the PCAOB that it should consider the various benefits and risks to investors, auditors, and broker-dealers, as it considers any potential rule.

On June 14, 2011, the PCAOB adopted an interim rule to create a temporary inspection program for auditors of broker-dealers, and determined to include all auditors of all broker-dealers in its pilot program.  In their comments adopting the rule, Board members noted that the final inspection program may be more targeted depending on the findings of the interim program.

The AICPA supports PCAOB registration and inspection of all auditors of broker-dealers with access to client assets, but does not believe inspections should be required of auditors of introducing broker-dealers where such inspections seem unlikely to stop fraud.  The AICPA does not believe that there has been sufficient due diligence or research to warrant regulating auditors of introducing broker-dealers as part of the interim program, but rather advocated for a study to determine the benefits of such regulation.  AICPA believes that this new regulatory responsibility compels the PCAOB to balance the need to protect investors with the desire to avoid unnecessary and excessive regulation.  Regulation without a clear policy rationale will not help prevent future problems.

There are approximately 1,200 firms performing audits of broker-dealers, but only about 10 percent of those broker-dealers are clearing, carrying, or custodial in nature, meaning they actually have access to client funds.  The remaining introducing broker-dealers are prohibited from collecting or holding their clients’ monies.  AICPA believes that changes to PCAOB authority should focus strategically on that 10 percent where any potential fraud or malfeasance is most likely to be detected.  Inspecting the auditors of broker-dealers who don’t account for client monies is unlikely to help stop financial fraud.

The AICPA continues to advocate for a final rule covering auditors of clearing, carrying, and custodial broker-dealers, since it is these broker-dealers that have direct access to investor funds and there is likely to be the biggest benefit to the public from additional oversight.

The AICPA hopes the PCAOB will ultimately adopt a targeted final rule when it undertakes that rulemaking process, currently scheduled for 2013.  The AICPA will continue to work with affected audit firms, broker-dealers, and other interested parties to encourage the PCAOB to develop a balanced and targeted rule.

Copy of Legislation

A copy of the Wall Street Reform and Consumer Protection Act of 2009 is available on the Library of Congress’s THOMAS website.  The most recent version of the bill, and all Congressional actions, are available by searching for H.R. 4173 by bill number in the 111th Congress. The relevant section of the Act is Section 982.

Letters from Members of Congress

May 27, 2011 Letter from House Financial Services Committee Chairman Spencer Bachus and Capital Markets and Government Sponsored Enterprises Subcommittee Chairman Scott Garrett to PCAOB.

February 1, 2011 Letter from Eight CPA Members of Congress (Mike Conaway, Brad Sherman, John Campbell, Lynn Jenkins, Collin Peterson, James Renacci, Bill Flores and Steven Palazzo) to PCAOB.


AICPA Letters

February 15, 2011 Letter to Public Company Accounting Oversight Board Regarding Proposed Temporary Rule for Interim Inspection Program of Auditors of Non-Public Broker-Dealers

December 7, 2009 AICPA Letter in Support of Section 7601 of HR 4173

Staff Contact

Diana Huntress Deem
Senior Manager, Congressional and Political Affairs

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AICPA Letter of Support H.R. 5813, Overtime Reform and Enhancement Act (OREA) August 18, 2016

Legislative Letters AICPA supports the efforts of Rep. Kurt Schrader to reduce the burden of the Department of Labor overtime rule with H.R. 5813, OREA, which will remove the automatic threshold update and create a gradual onramp to implementation of the current threshold level.
Published on September 20, 2016

Department of Labor Overtime Rule

Article The Department of Labor (DOL) announced its final rule related to overtime pay. Under the new rule, the standard salary threshold will double from $455 per week to $913 per week. This amounts to a change in an annual salary from $23,660 to an annual salary of $47,476. Further, the
Published on September 16, 2016

AICPA Letter of Support H. Con. Res. 140

Legislative Letters AICPA letter supporting Rep. Renacci legislation related to the federal financial statements, H. Con. Res. 140 on 9.6.16
Published on September 07, 2016

IFRS - GAAP Convergence

Article International Financial Reporting Standards (IFRS) set by the International Accounting Standards Board (IASB) in London is a response to worldwide demand from regulators, investors, businesses, and auditing firms for a single set of high-quality, globally-accepted accounting standards.
Published on August 20, 2016

ERISA Fiduciary Definition - Appraisers of Employee Stock Ownership Plans

Article The AICPA believes that the U.S. DOL should implement rules that would require appraisers of ESOPs to meet minimum qualification requirements, including holding relevant credentials and training, and comply with applicable professional valuation standards.
Published on August 18, 2016

Tax Legislation and Policy

Article The Congressional and Political Affairs Team often assists the Tax Team with tax legislation and policy issues, and advocates about them to Members of Congress and other key policymakers on behalf of the profession.
Published on August 13, 2016

Preserving the Cash Basis Method of Accounting for CPA Firms

Overview The AICPA is opposed to certain provisions included in tax reform proposals that would limit the availability of the cash basis method of accounting.
Published on July 23, 2016

Federal Legislative and Regulatory Issues

Federal Law This page highlights the advocacy issues in which the Congressional & Political Affairs Team is advocating on behalf of the profession, and also those issues that the team has recently followed.
Published on May 25, 2016

Letter from Senate Democrats to Department of Labor February 2016

Legislative Letters Letter of support from Senate Democrats, encouraging Secretary Lew to work swiftly in implementing the Department of Labor proposed overtime rule on February 29th, 2016.
Published on May 25, 2016

May 2016, Cash Coalition Letter to the Senate Finance Committee

Legislative Letters Cash Coalition letter to Senate Finance Committee on cash basis method of accounting 5-10-2016
Published on May 12, 2016

April 2016, Letter to Senate Finance Committee from the AICPA

Legislative Letters AICPA letter for the record to the Senate Finance Committee on hearing entitled “Navigating Business Tax Reform.” The letter encourages the committee not restrict the use of the cash basis method of accounting for pass-through entities.
Published on May 10, 2016

PPWO Letter of Support S. 2707 4.18.16

Legislative Letters Coalition letter sent in support of Senate bill S. 2707 blocking the proposed Department of Labor Overtime Rule.
Published on April 28, 2016

PPWO Letter of Support H.R. 4773 4-18-16

Legislative Letters Coalition letter sent in support of the House Bill H.R. 4773 blocking the proposed Department of Labor Overtime Rule.
Published on April 28, 2016

PPWO Letter to the Hill re Overtime Rule 12-7-15

Legislative Letters Coalition letter opposing the Department of Labor Overtime Rule.
Published on April 28, 2016

AICPA Comments on Proposed Revision of the Employer Information Report (EEO-1)

Comment Letter AICPA's comments in response to the proposed revision of the Employer Information Report advanced by the EEOC to collect summary pay data separated by gender, race, and ethnicity.
Published on April 22, 2016

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