Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski and I’m here again with Ryan Istre, one of our Audit Directors here at PKF Texas. Ryan welcome back to the Playbook.
Ryan: Thanks for having me Jen.
Jen: So how has the process of the PCAOB inspections of auditors of broker dealers impacted us and what we’re doing with our broker dealer clients?
Ryan: That’s a good question. About 4 years ago the PCAOB began inspecting auditors of broker dealers. What that means for us is that there’s a new level of rules that we have to play by, however if you were a client of ours you would probably not even know the difference. Over all of the previous years that we’ve been doing audits we’ve been under inspections for AICPA rules, PCAOB rules and various other organizations that ensure our audit quality is up to par. So from a client’s perspective you probably wouldn’t even notice a difference.
Jen: So has anything changed at all then?
Ryan: There are a few changes that have happened. With the PCAOB being the official body over this inspection process for broker dealers one of the rules has been changed recently is that there’s a concept of what’s called an engagement quality reviewer. That is not the lead partner on an engagement, but it’s the second partner to ensure quality control. The PCAOB rules specifically disallow partners who’ve participated in the previous two engagements as the lead partner from turning into that engagement quality reviewer. So that basically allows for new sets of eyes to happen with regard to the quality controls over the audit.
Jen: So does any other information come out of the PCAOB’s inspection process?
Ryan: There’s been some good information that’s come out of it. PCAOB is in what they consider their interim inspection period right now. So while they’re not posting auditor-specific reports as they do with their normal public companies, they’re going to be posting general guidance around what they’ve learned from the inspection process. Unfortunately there’s been several deficiencies that they’ve found in their audit inspection process. Probably higher than I’d like to let onto, but it’s going to be a good thing because a lot of the infractions that they’ve noticed probably were fairly minor, but there have been some that have been more serious such as independence infractions and partner rotation rules for some of the smaller firms that may not have been super familiar with the PCAOB’s rules.
Jen: Well good. And I know our audit team really sticks on to those PCAOB rules.
Ryan: Absolutely. You have to, you have to.
Jen: Perfect. Well we’ll get you back to talk a little bit more.
Ryan: Yep, sounds good.
Jen: Thank you. This has been another Thought Leader production brought to you by PKF Texas Entrepreneur’s Playbook, tune in next week for another chapter.
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