The Public Company Accounting Oversight Board is proposing a new auditing standard that is targeted toward auditors of broker-dealers but could have some implications for public companies that go beyond the minimum requirements for an audit of financial statements and internal controls.

In its mandate under Dodd-Frank to regulate auditors of broker-dealers who are registered with the Securities and Exchange Commission, the PCAOB is proposing new rules for how those auditors must conduct their audits. One of the proposed rules focuses on how to audit supplemental information that might accompany audited financial statements. For broker-dealer audits, that would include certain documentation to support the computation of net capital, the determination of reserve requirements, and possession or control of client assets.

The PCAOB already has a standard on the books, AU Section 551, Reporting on Information Accompanying the Basic Financial Statements in Auditor-Submitted Documents, that governs how all registered auditors would conduct audits of any supplemental information included with financial statements, if the issuer of the financial statements asks for such an audit. The proposal would update that standard, which was originally carried into the PCAOB rule book when the board formed under Sarbanes-Oxley and adopted the American Institute of Certified Public Accountants' rules on an interim basis.

Companies that ask their auditors to take a look at any supplemental schedules they might include with financial statements could be affected by the new standard, even though it is targeted at broker-dealer audit work. That might include, for example, documentation to support valuation decisions that are pivotal to financial statement results. It might also include any schedules or other supporting documentation that is required by some regulator other than the SEC, such as a banking regulator.

Gaylen Hansen, a partner with audit firm Ehrhardt Keefe Steiner & Hottman and a member of the PCAOB's Standing Advisory Group, says the PCAOB appears to want more specificity over supplemental information, but he expects the impact to be minimal. “Overall, this is likely to result in a little more work on the part of practitioners, but certainly will not be a major change,” he says.

The proposed standard is intended to update and enhance the audit procedures an auditor would use when evaluating supplemental information by establishing certain procedural and reporting responsibilities auditors would follow. The PCAOB is accepting comments on the proposal through Sept. 12.

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