Federal Issues

    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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    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 January 14, 2016

    Congressional and Political Affairs Advocacy

    Overview The AICPA monitors and advocates on legislative and other matters that affect the accounting profession. Working with state CPA societies and other professional organizations, the AICPA provides information to and educates federal, state and local policymakers regarding key issues.
    Published on December 15, 2015

    AICPA Comment Letter to DOL Regarding Proposed Overtime Rule

    Comment Letter Comments in response to the DOL July 6, 2015 Notice of Proposed Rulemaking to amend the FLSA exemptions from minimum wage and overtime requirements for executive, administrative, professional, outside sales, and computer employees.
    Published on September 24, 2015

    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 03, 2015

    Innovation Act Support Letter - US House

    Legislative Letters Letter sent by Barry Melancon to Members of the U.S. House of Representatives in support of HR 9, the Innovation Act.
    Published on July 16, 2015

    Audits of FHA-Approved Participants and Related HUD Requirements

    Article FHA proposes new rule to strengthen risk management and shift accountability for the underwriting of FHA-insured loans to the mortgage banks. It may no longer require FHA to approve loan correspondents (mortgage brokers) participating in the FHA program and HUD would no longer require FHA to submit audited financial statements or audits
    Published on June 03, 2015

    Accounting Partnership Retirement Practices

    Article In recent years, Equal Employment Opportunity Commission (EEOC) staff have been investigating and considering litigation against accounting firms organized as partnerships with a goal of requiring firm partners to be treated as “employees” for purposes of the Age Discrimination in Employment Act (ADEA). The AICPA has written the EEOC asking
    Published on June 02, 2015


    Overview Extensible Business Reporting Language (XBRL) used in financial and other reporting allows for easier access to more transparent information.  AICPA supports legislative proposals to utilize XBRL by companies, Federal agencies and recipients of Federal funds.
    Published on June 02, 2015

    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 June 02, 2015

    H.R. 1, Tax Reform Act of 2014

    Article Legislative text of Chairman Camp's tax reform act of 2014.
    Published on June 02, 2015

    Interstate Taxation/Mobile Workforce Bill

    Article The AICPA is supporting legislation that would reduce the tax burden and compliance requirements related to nonresident state income tax withholding laws.
    Published on May 13, 2015

    Section 404(b) of Sarbanes-Oxley Act of 2002

    Article The Sarbanes Oxley Act requires that the management of public companies assess the effectiveness of the internal control of issuers for financial reporting.  Section 404(b) requires a publicly-held company’s auditor to attest to, and report on, management’s assessment of its internal controls. AICPA believes that all investors in public companies
    Published on May 13, 2015

    Dodd-Frank Whistleblower Rules

    Article Dodd-Frank Act Sections 922 and 748 require the Securities and Exchange Commission and Commodities Futures Trading Commission to implement rules to pay cash awards of up to 30% in settlements over $1 million to whistleblowers who voluntarily provide original information about violations of the Securities laws and Commodity Exchange Act,
    Published on May 13, 2015

    FASB Independence and Fair Value Accounting

    Article The AICPA strongly and unequivocally supports independence of the U.S. and international accounting standard setting bodies, the Financial Accounting Standards Board (FASB) in Norwalk, Connecticut, and the International Accounting Standards Board (IASB) in London.
    Published on May 01, 2015

    March 15, 2015 AICPA Letter to Senate Finance Committee Business Income Tax Reform Working Group

    Legislative Letters March 15, 2015 AICPA Letter to Senate Finance Committee Business Income Tax Reform Working Group
    Published on April 22, 2015

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