In the wake of the Dodd-Frank Act authorizing PCAOB oversight of the audits of broker-dealers, all brokers and dealers registered with the SEC as of the date on which the allocation of the annual accounting support fee is set are subject to the accounting support fee. The Board's funding rules require that the allocation of the broker-dealer accounting support fee be based on tentative net capital, as that term is defined in SEC regulations.
The funding rules are based on Section 109(h)(3) of the Sarbanes-Oxley Act of 2002, which states that the amount due from a broker or dealer shall be in proportion to the net capital of the broker or dealer. The Board uses tentative net capital reported by brokers and dealers on their quarterly FOCUS reports to determine the allocation of the broker-dealer accounting support fee. In the Board’s view, this data provides a common basis among the broker and dealer population for determining the combined average, quarterly tentative net capital amount. In a FAQ, the Board noted that it would not recalculate a firm’s share of the broker-dealer accounting support fee using tentative net capital amounts reflected on the monthly FOCUS reports, instead of the quarterly FOCUS reports, even if a firm provided such data to the Board.
A firm ceasing to be a broker or dealer after the 2011 Calculation Date, which was October 31, 2011, will still have to pay the accounting support fee. The Board noted that the fact that a firm ceases to be a broker or dealer after that date does not relieve the firm of its responsibility for a share of the broker-dealer accounting support fee. However, a firm ceasing to be a broker or dealer before the 2011 Calculation Date would not have to pay the accounting support fee.
PCAOB Rule 7104(b)(1) provides that an auditor may not sign an unqualified audit opinion with respect to a broker-dealer’s financial statements unless the auditor has ascertained that the firm has no outstanding past-due share of the accounting support fee. There are three exceptions to this rule. First, PCAOB Rule 7103(c) allows a broker or dealer, under certain circumstances, to petition for correction of its share of the accounting support fee. Second, PCAOB Rule 7104(b)(2) creates a one-time exception to take account of a situation in which a broker or dealer may have a past-due share of the accounting support fee at a time when the broker or dealer needs the audit report to submit a report to, or make a filing with, the SEC.
Third, the Board will not enforce PCAOB Rule 7104(b) against an auditor that signs an unqualified audit opinion with respect to the financial statements of a broker or dealer with an outstanding past-due share of the accounting support fee of less than $50.
If a broker or dealer has paid its original share of the broker-dealer accounting support fee but not interest due under the PCAOB's rules, the auditor cannot sign an unqualified opinion unless one of the three exceptions is applicable.
PCAOB rules allow an auditor to ascertain that a broker or dealer has no outstanding past-due share of the accounting support fee by obtaining a representation from the broker or dealer. In addition, the PCAOB posts a list of brokers and dealers that have no outstanding past-due share of the accounting support fee.
Further, the Board said that a management representation that the brokerage firm has no outstanding past due share is sufficient to not preclude the auditor from signing an unqualified report. In such situations, the auditor does not have to also obtain a confirmation from the Board that no past-due share of the broker-dealer accounting support fee is outstanding. Further, the PCAOB noted that the fact that a broker or dealer is not on the Board's Web site confirmation list is not, in and of itself, a reason for an auditor to believe that a broker's or dealer's representation is inaccurate.