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.
     
    Resources

    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
    202.434.9276
    ddeem@aicpa.org 

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    AICPA Letter to SEC on Proposed Regulation Crowdfunding

    Comment Letter AICPA comments on the SEC's proposed new Regulation Crowdfunding under the Securities Act of 1933 and the Securities Exchange Act of 1934 to implement the requirements of Title III of the JOBS Act as published in SEC File No. S7-09-13.
    Published on February 06, 2014

    Jan 2014 - AICPA Statement for the Record regarding Conferences and Travel

    Article AICPA provided a Statement for the Record to the Senate Homeland Security and Government Affairs Committee in  response  to the hearing held on January 14, 2014 entitled, "Examining Conference and Travel Spending Across the Federal Government."
    Published on January 28, 2014

    Cash Basis Letter to Senate Finance Committee from Associations-Jan7-2014

    Legislative Letters Cash Basis Letter to Senate Finance Committee dated Jaunary 7, 2014 from American Council of Engineering Companies, American Dental Association, American Farm Bureau Federation, American Institute of Architects, American Institute of CPAs and S Corporation Association.
    Published on January 22, 2014

    Municipal Advisors

    Issue Brief The AICPA generally supports the SEC’s proposed rules as a means to strengthen investor protections in the municipal securities market.  The AICPA is concerned, however, because the proposed rule would require that accountants performing customary and usual accounting services would be required to register as municipal advisors.
    Published on January 07, 2014

    XBRL

    Article 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 December 30, 2013

    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 December 30, 2013

    Take Action Legislation Affecting ESOP Appraisers

    Article The AICPA urges FVS section members to seek congressional support of legislation to fix DOL fiduciary proposal on ESOP appraisers S. 273/HR 2041.
    Published on September 18, 2013

    CPAs Count! Make Your Voice Heard on Capitol Hill.

    Overview The AICPA PAC is the profession’s political action committee. This describes frequently asked questions about the AICPA PAC.
    Published on July 30, 2013

    AICPA Letter to House and Senate Cosponsor S273 and HR2041

    Legislative Letters AICPA Letter to House and Senate Cosponsor S273 and HR2041
    Published on July 12, 2013

    AICPA Letter to U.S. House of Representatives Supporting H.R. 1564.

    Legislative Letters The AICPA supported a bill passed on July 8, 2013 by the U.S. House of Representatives which would prevent the PCAOB from imposing mandatory audit firm rotation for public companies.
    Published on July 12, 2013

    May 21, 2013 Letter in Support of H.R. 2061, the Digital Accountability and Transparency Act of 2013

    Comment Letter May 21, 2013 Letter in Support of H.R. 2061, the “Digital Accountability and Transparency Act of 2013”.
    Published on June 27, 2013

    May 22, 2013 Letter in Support of S. 994, the Digital Accountability and Transparency Act of 2013

    Comment Letter May 22, 2013 Letter in Support of S. 994, the “Digital Accountability and Transparency Act of 2013”
    Published on June 27, 2013

    March 12, 2013 Letter in Support of Federal Government Data Transparency

    Comment Letter March 12, 2013 Letter in Support of Federal Government Data Transparency
    Published on June 27, 2013

    AICPA Letter to House Financial Services Committee Supporting H.R. 1564.

    Legislative Letters The AICPA supported a bill approved on June 19, 2013 by the House Financial Services Committee that would prevent the PCAOB from imposing mandatory audit firm rotation for public companies.
    Published on June 19, 2013

    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 May 14, 2013

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