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, 9510-9511 [2014-03555]
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Federal Register / Vol. 79, No. 33 / Wednesday, February 19, 2014 / Notices
[FR Doc. 2014–03575 Filed 2–18–14; 8:45 am]
BILLING CODE 8011–01–C
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.
EMCDONALD on DSK67QTVN1PROD with NOTICES
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
1 15
U.S.C. 7217(b).
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’’).
2 15
VerDate Mar<15>2010
16:15 Feb 18, 2014
Jkt 232001
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:
• 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
• 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
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
6 17
CFR 240.17a–5.
CFR 240.15c3–1.
8 17 CFR 240.15c3–3(e).
9 See paragraphs (d)(3)(i)(A)(2)–(5) of SEC Rule
17a–5.
7 17
PO 00000
Frm 00055
Fmt 4703
Sfmt 4703
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:
• 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
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
10 See
11 See
E:\FR\FM\19FEN1.SGM
17 CFR 240.17a–5(g)(2)(ii).
SEC Rule 17a–5(d)(4).
19FEN1
Federal Register / Vol. 79, No. 33 / Wednesday, February 19, 2014 / Notices
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
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
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
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71525; File No. PCAOB–
2013–02]
Public Company Accounting Oversight
Board; Order Granting Approval of
Proposed Rules, Auditing Standard
No. 17, Auditing Supplemental
Information Accompanying Audited
Financial Statements, and Related
Amendments to PCAOB Standards
EMCDONALD on DSK67QTVN1PROD with NOTICES
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 Auditing Standard No.
17, Auditing Supplemental Information
12 See
Deloitte Letter.
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).
1 15 U.S.C. 7217(b).
2 15 U.S.C. 78s(b).
13 Because
VerDate Mar<15>2010
16:15 Feb 18, 2014
Jkt 232001
Accompanying Audited Financial
Statements, 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 one comment
letter in response to the notice.5 This
order approves the Proposed Rules.
II. Description of the Proposed Rules
Auditing Standard No. 17, which
would supersede PCAOB interim
auditing standard AU section 551,
Reporting on Information
Accompanying the Basic Financial
Statements in Auditor-Submitted
Documents, applies when the auditor of
the company’s financial statements is
engaged to perform audit procedures
and report on supplemental information
that accompanies financial statements
audited pursuant to PCAOB standards.
Such supplemental information
includes:
• Supporting schedules that brokers
and dealers are required to file pursuant
to Exchange Act Rule 17a–5; 6
• Supplemental information (i)
required to be presented pursuant to the
rules and regulations of a regulatory
authority and (ii) covered by an
independent public accountant’s report
on that information in relation to
financial statements that are audited in
accordance with PCAOB standards; or
• Information that is (i) ancillary to
the audited financial statements, (ii)
derived from the company’s accounting
books and records, and (iii) covered by
an independent public accountant’s
report on that information in relation to
the financial statements that are audited
in accordance with PCAOB standards.
Historically, when auditors reported
on supplemental information, they often
expressed their opinions on the
supplemental information ‘‘in relation
to’’ the basic financial statements taken
as a whole.7 Audit procedures regarding
that supplemental information generally
have been performed in conjunction
with the audit of the financial
statements. The auditor’s report on
supplemental information under AU
sec. 551 is rooted in the concept that the
supplemental information is fairly
3 See Release No. 34–70843 (November 8, 2013),
78 FR 68872 (November 15, 2013).
4 Ibid.
5 See letter to the Commission from Deloitte &
Touche LLP, dated December 5, 2013 (‘‘Deloitte
Letter’’).
6 See 17 CFR 240.17a–5.
7 See AU sec. 551.12.
PO 00000
Frm 00056
Fmt 4703
Sfmt 4703
9511
presented ‘‘in relation to’’ the financial
statements as a whole. The Proposed
Rules retain the existing ‘‘in relation to’’
language in the auditor’s report;
however, they also update the report to
describe the auditor’s responsibilities
for the supplemental information.
The Proposed Rules establish
procedural and reporting
responsibilities for the auditor regarding
supplemental information
accompanying financial statements.
Specifically, the Proposed Rules
establish:
• Requirements that the auditor
perform audit procedures to test the
supplemental information;
• Requirements that the auditor
evaluate the supplemental information,
which include evaluating (1) whether
the supplemental information,
including its form and content, is fairly
stated, in all material respects, in
relation to the financial statements as a
whole, and (2) whether the
supplemental information is presented
in conformity, in all material respects,
with the relevant regulatory
requirements or other applicable
criteria;
• Requirements that promote
enhanced coordination between the
work performed on the supplemental
information with work performed on the
financial statement audit and, if
applicable, other engagements, such as
an attestation engagement for brokers
and dealers; and
• Reporting requirements that clearly
articulate the auditor’s responsibilities
when reporting on supplemental
information.
As part of the Proposed Rules, the
Board adopted conforming amendments
to several PCAOB standards, including
superseding PCAOB interim auditing
standard AU section 551.
The Proposed Rules would be
effective for audit procedures and
reports on supplemental information
that accompanies financial statements
for fiscal years ending on or after June
1, 2014.
III. Comment Letters
As noted above, the Commission
received one comment letter concerning
the Proposed Rules. The commenter
expressed unqualified support for the
Proposed Rules, 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.8 The commenter further noted
that the requirements for auditors
included in the Proposed Rules are
8 See
E:\FR\FM\19FEN1.SGM
Deloitte Letter.
19FEN1
]]>Agencies
[Federal Register Volume 79, Number 33 (Wednesday, February 19, 2014)]
[Notices]
[Pages 9510-9511]
From the Federal Register Online via the Government Printing 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
