By Courtney K. Corallo, CPA, Business Assurance & Advisory Services Senior Manager
PCAOB inspection report findings can be a useful resource for broker-dealers
Per the most recent FINRA Industry Snapshot Report, there were 3,298 broker-dealers registered with the U.S. Securities and Exchange Commission (“SEC”) in 2023. Generally, these broker-dealers are required to file reports annually with the SEC and the Financial Industry Regulatory Authority (“FINRA”), and the auditors of these broker-dealers are overseen by the Public Company Accounting Oversight Board (“PCAOB”).
Beginning in 2015 when audits of broker-dealers first became subject to PCAOB standards, the PCAOB has conducted inspections of a sample of all broker-dealer audits and summarizes the results of their inspections in an annual report.
The findings from these inspections can shed insight into the areas in which the PCAOB is most focused. While the findings are primarily geared to assist audit firms, they can also be useful for the management and audit committees of broker-dealers as they engage with audit firms regarding audit quality and broker-dealer financial reporting.
2024 PCAOB inspection report
The PCAOB’s most recent inspection report was released on June 13, 2025, and included the inspections of financial statement audits with fiscal years ending April 1, 2023, through March 31, 2024. Of the 253 total PCAOB-registered audit firms (down from 280 in 2023), the PCAOB selected a total of 60 firms for inspection. When selecting firms for inspection, the PCAOB uses a combination of a risk-based selection methodology (such as the number of broker-dealer audits performed, results from previous inspections, etc.) and a random selection methodology that provides an element of unpredictability.
From the firms selected, the PCAOB then selected 102 total audits for inspection. The PCAOB noted the number of firms with one or more audit and/or attestation engagement deficiencies remained high at 76%, up from 70% in 2023.
PCAOB’s inspection report findings
In reviewing the report, Keiter noted the following observations related to auditing financial statements engagements that had the largest percentages of deficiencies and thus reasonably represent focus areas of the PCAOB:
Revenue
As in similar years, revenue represents the largest deficiency area (48%). The significant deficiencies in this area included instances where firms did not perform any procedures for one or more significant revenue accounts, or did not perform procedures to address the assessed risks of material misstatement for one or more relevant assertions for revenue accounts and disclosures. Additional deficiencies noted included:
- Failure to test whether revenue recorded was accurate, including components that determine revenue.
- Failure to test whether performance obligations were distinct and satisfied prior to revenue recognition.
- Failure to test the accuracy and completeness of information produced by a service organization used in substantive testing.
- Failure to evaluate whether revenue sources presented in a single category should have been disaggregated in conformity with the requirements of ASC 606.
- Failure to evaluate whether revenues were appropriate classified
- Failure to evaluate whether the broker-dealer disclosed required information about its performance obligations in conformity with the requirements of ASC 606.
Other
Other audit areas with deficiencies included: journal entries (18%), evaluating audit results (16%), related party relationships and transactions (36%), expenses and related accruals (53%), receivables and payables (17%), securities owned and securities sold, not yet purchased (21%), and consideration of an entity’s ability to continue as a going concern (40%).
Additional resources
For more detailed information from the PCAOB’s inspection results, please review the full report on the PCAOB’s website:
Download the 2025 Broker Dealer Filing Guide here.
The Keiter Financial Services Industry team closely monitors these and other industry publications to keep you updated and informed. If you have any questions, please reach out to your Keiter Opportunity Advisor or Email | Call: 804.747.0000.
About the Author
Courtney K. Corallo, CPA, Business Assurance & Advisory Services Senior Manager
Courtney is a member of Keiter’s Business Assurance and Advisory Services team. Courtney provides audit and review services for not-for-profit organizations and financial services companies. She is a member of the Not-for-Profit team and Financial Services Industry team.
More Insights from Courtney K. CoralloThe information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.
