Changes to auditing and assurance standards will affect some brokerage firms sooner than others, the Investment Dealers Association of Canada says in a bulletin to members.
The IDA reports that in June the Auditing and Assurance Standards Board approved various new and revised assurance standards. These standards require external auditors to perform control related procedures, and take effect for financial statements and reports after Jan. 1, 2006. The rules are therefore applicable for the first time for Dec. 31, 2006 year-ends.
However, it notes that, as a result of changes in the audit environment over the past few years, some international audit firms have adopted policies to follow implementation dates set by the International Audit Standards Board. The international standards have similar requirements to the revised Canadian standards, but they apply for years ended Dec. 31, 2005.
It notes that audit firms that are mandated by their international practice to apply the new assurance standards early, include: Ernst & Young LLP, PriceWaterhouseCoopers LLP, Deloitte & Touche LLP, and KPMG LLP.
The IDA says that the early adoption of these new audit and assurance standards by some of the international audit firms will have an immediate audit impact on some IDA members with fiscal year-ends between Dec. 31, 2005 and Nov. 30, 2006, most importantly for introducing brokers that contract books and records services from carrying brokers. For Dec. 31, 2006 year-ends, all IDA members will be impacted.
These new assurance standards require the auditor of the introducing broker to assess the design and implementation of controls over critical business processes that are performed by the carrying broker, such as trades processing, clearing and settlement. This will require the auditor to document the controls over financial reporting that exist in the business processes and perform certain testing to ensure they have been placed into operation, it notes.
The new assurance standards will result in a need for the auditors of introducing brokers to satisfy themselves as to the design and implementation of controls at carrying brokers. This can be satisfied either through obtaining and reviewing a report issued by the service organization’s auditors or by requesting direct access to the carrying broker’s premises to perform the additional testing as part of their assurance audit of the introducing broker. In the event that the auditor of the introducing broker is unable to perform these procedures, then the auditor will be unable to render an opinion. The IDA says “this scope limitation is unacceptable to the IDA”.
“All introducing brokers are required to contact their external auditor to determine the timing and cost impact of these new assurance standards and liaise with their carrying broker as to how they plan to satisfy the early adoption of this new audit requirement,” it adds.
Early adoption of audit assurance standards will affect dealers, IDA says
International firms to implement polices for 2005
- By: James Langton
- October 18, 2005 October 18, 2005
- 07:40