It would inevitably raise the cost of auditing for firms, as the accountant's former clients rush to find someone else to audit their accounts.
The board said that about 800 accounting firms perform audits of brokerage firms, and that about 500 of those were previously exempt from board inspection.
The downsides are insufficiencies regarding a simplistic understanding of experts and expertise, a neglect of the role of auditing firms, and only an imbalanced integration of different stakeholders.
Other bank analysts are also being closely scrutinised in routine audits of their firms.
DealBook » Oversight Board Faults Broker-Dealer Audits | The Public Company Accounting Oversight Board found deficiencies in some audits of brokerage firms.
It was that fraud that led Congress to authorize the oversight board to review audits of brokerage firms.
The CME Group, which has started a $100 million protection fund for farmer and ranchers, has stepped up its surprise audits of brokerage firms.
The board inspects audits of major firms every year, and releases a public report detailing problems that were found in various audits its inspectors reviewed, although it does not name the companies.
Using publicly available data from annual reports, we find that SEC rule changes (33-8128 and 33-8644) that impose time pressure on the audits of registered firms have a negative impact on earnings quality, which we interpret as evidence of lower audit quality.
The independence nature of the exogenous accountants who are experts and specialists in computing and auditing of accounts for firms may be a reason for the efficacy of their services.
