[Federal Register Volume 79, Number 33 (Wednesday, February 19, 2014)]
[Notices]
[Pages 9510-9511]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-03555]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71524; File No. PCAOB-2013-01]
Public Company Accounting Oversight Board; Order Granting
Approval of Proposed Rules, Standards for Attestation Engagements
Related to Broker and Dealer Compliance or Exemption Reports Required
by the U.S. Securities and Exchange Commission and Related Amendments
to PCAOB Standards
February 12, 2014.
I. Introduction
On October 30, 2013, the Public Company Accounting Oversight Board
(the ``Board'' or the ``PCAOB'') filed with the Securities and Exchange
Commission (the ``Commission''), pursuant to Section 107(b) \1\ of the
Sarbanes-Oxley Act of 2002 (the ``Sarbanes-Oxley Act'') and Section
19(b) \2\ of the Securities Exchange Act of 1934 (the ``Exchange
Act''), proposed rules to adopt standards for attestation engagements
related to broker and dealer compliance or exemption reports required
by the U.S. Securities and Exchange Commission and related amendments
to PCAOB standards (collectively, the ``Proposed Rules''). The Proposed
Rules were published for comment in the Federal Register on November
15, 2013.\3\ At the time the notice was issued, the Commission
designated a longer period to act on the Proposed Rules, until February
13, 2014.\4\ The Commission received two comment letters in response to
the notice.\5\ This order approves the Proposed Rules.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 7217(b).
\2\ 15 U.S.C. 78s(b).
\3\ See Release No. 34-70842 (November 8, 2013), 78 FR 68911
(November 15, 2013).
\4\ Ibid.
\5\ See letters to the Commission from Deloitte & Touche LLP,
dated December 5, 2013 (``Deloitte Letter'') and Suzanne H. Shatto,
dated December 17, 2013 (``Shatto Letter'').
---------------------------------------------------------------------------
II. Description of the Proposed Rules
Attestation Standard No. 1, Examination Engagements Regarding
Compliance Reports of Brokers and Dealers, establishes requirements for
the auditor with respect to the auditor's examination regarding a
broker's or dealer's compliance report and establishes requirements
that are designed specifically for the examination required by Exchange
Act Rule 17a-5 (``Rule 17a-5'').\6\ Consistent with Rule 17a-5,
Attestation Standard No. 1 requires auditors to obtain sufficient
appropriate evidence to opine on a broker's or dealer's statements in
its compliance report as to whether:
---------------------------------------------------------------------------
\6\ 17 CFR 240.17a-5.
---------------------------------------------------------------------------
The Internal Control Over Compliance of the broker or
dealer was effective during the most recent fiscal year;
The Internal Control Over Compliance of the broker or
dealer was effective as of the end of the most recent fiscal year;
The broker or dealer was in compliance with Exchange Act
Rule 15c3-1 \7\ (the ``net capital rule'') and Exchange Act Rule 15c3-
3(e) \8\ (the ``reserve requirements rule'') as of the end of the most
recent fiscal year; and
---------------------------------------------------------------------------
\7\ 17 CFR 240.15c3-1.
\8\ 17 CFR 240.15c3-3(e).
---------------------------------------------------------------------------
The information the broker or dealer used to state whether
it was in compliance with the net capital rule and reserve requirements
rule was derived from the books and records of the broker or dealer.\9\
---------------------------------------------------------------------------
\9\ See paragraphs (d)(3)(i)(A)(2)-(5) of SEC Rule 17a-5.
---------------------------------------------------------------------------
Attestation Standard No. 1 provides requirements for auditors that:
Focus the auditor on the matters that are most important
to the auditor's conclusions regarding the broker's or dealer's
assertions;
Incorporate consideration of fraud risks, including the
risk of misappropriation of customer assets;
Are designed to be scalable based on the broker's or
dealer's size and complexity;
Coordinate the examination engagement with the audit of
the financial statements and the audit procedures performed on
supplemental information; and
Describe how to report on an examination engagement in
connection with the requirements of Rule 17a-5.
Attestation Standard No. 1 reflects the requirement in Rule 17a-5
that the auditor must obtain reasonable assurance to support the
auditor's opinion. In particular, Attestation Standard No. 1 requires
the auditor to obtain reasonable assurance in order to opine on whether
the broker's or dealer's assertions are fairly stated, in all material
respects.
Attestation Standard No. 2 establishes requirements for the auditor
with respect to the auditor's review regarding the broker's or dealer's
exemption report and establishes requirements that are designed
specifically for the review required by Rule 17a-5.\10\ Attestation
Standard No. 2 establishes requirements for making inquiries and
performing other procedures that are commensurate with the auditor's
responsibility to obtain moderate assurance regarding whether one or
more conditions exist that would cause one or more of the broker's or
dealer's assertions not to be fairly stated, in all material respects.
The broker's or dealer's exemption report includes the following
assertions:
---------------------------------------------------------------------------
\10\ See 17 CFR 240.17a-5(g)(2)(ii).
---------------------------------------------------------------------------
A statement that identifies the provisions in paragraph
(k) of Exchange Act Rule 15c3-3 (the ``exemption provisions'') under
which the broker or dealer claimed an exemption from Exchange Act Rule
15c3-3 (the ``identified exemption provisions'');
A statement that the broker or dealer (1) met the
identified exemption provisions throughout the most recent fiscal year
without exception or (2) met the identified exemption provisions
throughout the most recent fiscal year except as described in the
exemption report; and
If applicable, a statement that identifies each exception
during the most recent fiscal year in meeting the identified exemption
provisions (an ``exception'') and that briefly describes the nature of
each exception and the approximate date(s) on which the exceptions
existed.\11\
---------------------------------------------------------------------------
\11\ See SEC Rule 17a-5(d)(4).
---------------------------------------------------------------------------
The procedures required by Attestation Standard No. 2 include
evaluating relevant evidence obtained from the audit of the financial
statements and the audit procedures performed on supplemental
information and are designed to enable the auditor to scale the review
engagement based on the broker's or dealer's size and complexity.
Attestation Standard No. 2 also establishes requirements for the
content of the review report.
As part of the Proposed Rules, the Board adopted conforming
amendments to several PCAOB auditing and attestation standards,
including Auditing Standard No. 3, Audit Documentation, Auditing
Standard No. 7, Engagement Quality Review, and interim attestation
standards AT sec. 101 and AT sec. 601.
The Proposed Rules would be effective for examination engagements
and review engagements for fiscal years ending on or after June 1,
2014.
III. Comment Letters
As noted above, the Commission received two comment letters
concerning the Proposed Rules. The commenters expressed support for the
[[Page 9511]]
Proposed Rules, with one commenter noting that they are consistent with
the Commission's amended Rule 17a-5 and are necessary to enable
auditors of brokers and dealers to comply with the requirements
therein.\12\
---------------------------------------------------------------------------
\12\ See Deloitte Letter.
---------------------------------------------------------------------------
IV. Conclusion
The Commission has carefully reviewed and considered the Proposed
Rules and the information submitted therewith by the PCAOB, including
the comment letters received. In connection with the PCAOB's filing and
the Commission's review, the Commission finds that the Proposed Rules
are consistent with the requirements of the Sarbanes-Oxley Act and the
securities laws and are necessary or appropriate in the public interest
or for the protection of investors.\13\
---------------------------------------------------------------------------
\13\ Because these proposed rules apply solely in connection
with the obligations of registered brokers and dealers pursuant to
17 CFR 240.17a-5, no separate determination is necessary under 15
U.S.C. 7213(a)(3)(C).
---------------------------------------------------------------------------
It is therefore ordered, pursuant to Section 107 of the Act and
Section 19(b)(2) of the Exchange Act, that the Proposed Rules (File No.
PCAOB-2013-01) be and hereby are approved.
By the Commission.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-03555 Filed 2-18-14; 8:45 am]
BILLING CODE 8011-01-P