
[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]


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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.
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    \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'').
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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:
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    \6\ 17 CFR 240.17a-5.
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     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
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    \7\ 17 CFR 240.15c3-1.
    \8\ 17 CFR 240.15c3-3(e).
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     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\
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    \9\ See paragraphs (d)(3)(i)(A)(2)-(5) of SEC Rule 17a-5.
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    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:
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    \10\ See 17 CFR 240.17a-5(g)(2)(ii).
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     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\
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    \11\ See SEC Rule 17a-5(d)(4).
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    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

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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\
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    \12\ See Deloitte Letter.
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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\
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    \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).
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    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


