7 Most Popular Tips to Prepare for Broker-Dealer Audit Services

Broker-dealers face a few separate challenges than other financial service providers. Because they offer advice and proprietary financial products, broker-dealers must meet compliance regulations. Their financial statements must be clear and accurate, and their internal controls must be adequate.

Each year, auditors pay a visit to broker-dealers, a crucial part of regulatory requirements. The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) mandate these audits to uphold the industry’s integrity. 

Just a few simple steps to prepare for the audit can help your firm calm its nerves. Here are seven ways to get ready for broker dealer audit services visits.

1. Understand the Goals of the Audit

The main objective of a broker-dealer audit is to ensure the firm is meeting regulatory compliance. Auditors take a close look at the firm’s financial statements and verify their financial protocol integrity. Knowing these goals can help your firm prepare to give broker dealer audit services the information they need. 

2. Gather a Lot of Supporting Documentation

Paperwork lies near the heart of financial audits, and broker dealer audits are no different. Make sure you collect all documentation that the auditor will request, including:

• Financial statements

• General ledger

• Accounting records

• Client account records

• Compliance documents and regulatory filings

• Policy and procedure documentation

• Insurance policies

• Corporate governance documents

• Employee records

The auditor may ask for other types of documentation, so be prepared to retrieve whatever records they need.

3. Communicate Openly With Your Team

Be honest and forthright with your staff in anticipation of the auditor’s visit. Set expectations and help them prepare the documents they may be responsible for. Always be available to answer your team’s questions and concerns before the visit.

4. Understand the Auditor’s Independence Requirements

Broker-dealers are generally responsible for selecting their auditor services. They need to be independent of your firm and can’t already be managing your accounting, financial statements, or other management areas. Seek auditors who have track records of quality and integrity.

5. Communicate With Your Auditor

Keep all lines of communication with your auditor open. If your firm has changed the way it works, entered into new business agreements, opened up new avenues of revenue, or made other adjustments, let the auditor know. This will define how the audit will be conducted and reinforce the trust between you and your auditor.

6. Stay Compliant With Regulations

Regulatory compliance is your responsibility at all times. It’s well worth your time to double-check your compliance status all year, especially in the days before your audit is scheduled to take place.

7. Keep Calm and Carry On

Audits inevitably cause shivers of anxiety, even if they’re expected, annual routines. Staying calm and relaxed demonstrates the professional nature of your business and shows confidence in your procedures. Believe it or not, steadying those nerves can make the process run smoothly or produce a favorable outcome.

Get Through Your Audit

By following these procedures and preparations, your broker-dealer firm can facilitate the next visit from your local auditor.