Small B-Ds duck audit firm fees

Most small broker-dealers wouldn't have to pay assessments to the Public Company Accounting Oversight Board under proposed rules put forth by the board yesterday. Just 640 of the 4,600 U.S. brokerage firms will pay fees to the PCAOB to cover the cost of auditing their auditors. According to the PCAOB, annual assessments would range from $400 per firm up to $1.27 million for the very largest firms. But small firms would have to wait for any exemption from having to use board-registered auditors. Final PCAOB rules covering audits of broker-dealers — including a decision on what types of firms would be exempt — are expected in about two years, according to the PCAOB. Under Dodd-Frank, the PCAOB has the authority to exempt certain broker-dealers from a requirement that annual audits be performed by a PCAOB-registered firm. Broker-dealer firms have complained about the requirement, claiming that the Sarbanes-Oxley provision has raised costs and forced firms to use auditors who don't understand securities firms. Giving small firms a pass on assessments was "a good start," said Lisa Roth, chief executive of Keystone Capital Corp. and past chairman of the National Association of Independent Broker/Dealers Inc., who attended the PCAOB meeting yesterday. The board "clearly doesn't know enough about B-Ds" to begin granting exemptions from PCAOB-regulated audits, she said. "But I have confidence that they will get to know [the industry] well enough to issue exemptions." In a speech last week, PCAOB acting chairman Daniel Goelzer indicated that he's leaning toward exempting smaller firms. The PCAOB yesterday proposed for public comment a temporary rule to establish an interim inspection program for accounting firms' audits of broker-dealers. The interim program "will allow the board to begin inspection work on audits … without waiting until the board can make fully informed judgments about the scope of a permanent program," the PCAOB said in a statement. Comments on the proposal are due by Feb. 15.