2024 broker-dealer audit deficiency rates remain high

The Public Company Accounting Oversight Board reported that deficiency rates remain high across examination, review and audit engagements for auditors of broker-dealers.

In the 2024 edition of its annual report on broker-dealer audits, the PCAOB found a slight improvement across firms’ examination engagements year over year. It found at least one deficiency in 17 (59%) of the 29 examination engagements it reviewed, a decrease of two from 2023. 

The largest audit firms performed 15 of the examination engagements reviewed, and deficiencies were identified in six, a decrease from the prior year. The remaining audit firms performed the other 14 engagements reviewed, and deficiencies were identified in 11, also a decrease from the prior year. 

Results were consistent year to year across firms’ review engagements. The PCAOB reviewed 64 engagements and found at least one deficiency in 27 (42%), consistent with the 2023 results. 

The largest audit firms performed 15 of the review engagements reviewed, and deficiencies were found on two, which is the same as 2023. Meanwhile, the remaining audit firms performed 49 of the review engagements, and deficiencies were identified in 25, also the same as the prior year. 

Finally, audit engagement deficiencies increased across all firms. The PCAOB found at least one deficiency in 68 (66%) of the 102 audit engagements it reviewed, an increase of 10 from 2023. 

The largest audit firms performed 31 of these audit engagements, and at least one deficiency was identified in 13 (42%), three more than the prior year. The remaining audit firms performed the other 71 engagements, and at least one deficiency was identified in 55 (77%), an increase of seven from 2023.

The areas with the most deficiencies were revenue, journal entries and evaluating audit results. Deficiencies in revenue procedures included instances where firms did not sufficiently test whether recorded revenues were accurate, performance obligations were satisfied and disclosure requirements were met. For journal entries, firms did not consider the characteristics of potentially fraudulent journal entries when identifying and did not perform journal entry procedures. And for evaluating audit results, firms did not sufficiently evaluate whether the broker-dealer financial statements were presented fairly in accordance with GAAP.