Watchdog proposes Dodd-Frank standards for B-D audits

Accounting firms would have to consider how much risk their clients take when auditing brokerage firms under rules proposed by the industry's new watchdog. The proposal from the Public Company Accounting Oversight Board comes a month after the nonprofit corporation established an inspection program for auditors of broker-dealers under terms of the 2010 Dodd-Frank financial reform act. “It would require auditors to use judgment to identify and focus on matters that are most important to the customer-protection objectives,” said PCAOB Chairman James R. Doty, in a statement. The proposed standards are open for a two-month public comment period. A final version would be adopted only if the Securities and Exchange Commission, which oversees the PCAOB, approves its own rule proposed last month to beef up disclosure requirements for broker-dealers who hold clients' funds. “The broker-dealer community is very diverse, and the business models and risk profiles of the roughly 5,000 registered broker-dealer firms vary,” said Daniel Goelzer, a member of the audit board. “The proposals recognize that reality. They are explicitly risk-based and are intended to be scalable to firms of different types and sizes.” Also today, the PCAOB proposed standards for auditor reviewing supplemental information a company files with its financial statements. Quarterly earnings announcements sometimes are accompanied by longer, more detailed financial tables that go beyond the standard income statement and balance sheet, offering information that some investors would consider material. --Bloomberg News--