On 8 March 2018, the International Forum of Independent Audit Regulators (IFIAR) released the report of its 2017 Inspection Findings Survey (Report) as well as the Survey Report Stakeholders Announcement (Announcement). The survey was IFIAR’s sixth annual survey of inspection findings from member regulators’ individual inspections of audit firms affiliated with the six largest global audit firm networks.
The 2017 Annual Survey reviewed two categories of activities, (a) inspections performed on firm-wide systems of quality control, and (b) inspections of individual audit engagements.
As noted in the Announcement, the analysis from 2017 inspections found that 40% of audit engagements inspected had at least one finding, compared to 42% in the 2016 survey and to 47% in the first survey capturing this percentage (2014 survey).
The highest rate and greatest number of findings in the 2017 survey were in the areas of accounting estimates and internal control testing. In accounting estimates, most findings related to failure to assess the reasonableness of assumptions, including consideration of contrary or inconsistent evidence and internal control testing. For internal control testing, the most common type of finding was the failure to obtain sufficient persuasive evidence to support reliance on manual internal controls, followed by the failure to sufficiently test controls over, or the accuracy and completeness of, data or reports produced by management.
Overall, IFIAR concluded that the inspection results showed that ‘the frequency of findings identified through inspections of listed [public interest entity] PIE audits is trending downward on an overall basis’. However, IFIAR also found that ‘progress is not experienced in all jurisdictions at the same rate and no definitive trends have been noted for findings arising from inspections of firm-wide systems of quality control’. Based on these results, IFIAR challenged global networks to ‘continue in their efforts to strengthen their systems of quality control and drive consistent execution of high quality audits throughout the world’.
Links to the Annual Report and Announcement are available here.
SEC Cautions on Use of Potentially Unlawful Online Trading Platforms
The Divisions of Enforcement and Trading and Markets of the US Securities and Exchange Commission (SEC) issued Statement on Potentially Unlawful Online Platforms for Trading Digital Assets (Statement). The Statement warns of the risks involved in trading digital assets on online platforms. It also advises consumers to consider the risks these types of trades and to obtain information before entering into them.
The SEC warned that online trading platforms ‘have become a popular way investors can buy and sell digital assets, including coins and tokens offered and sold in so-called Initial Coin Offerings (ICOs)’. These platforms ‘often claim to give investors the ability to quickly buy and sell digital assets’. The operators of the platforms may even describe them as ‘exchanges’, making them appear to investors as SEC-registered and regulated marketplaces when they are not.
To protect their investment through the protection of the Federal securities laws and SEC enforcement, the SEC advises investors to trade using platforms or entities registered with the SEC, such as national securities exchanges, alternative trading systems (ATS), or broker-dealers.
Further, investors that wish to use online trading platforms should ask questions and evaluate significant risks before trading digital assets on the selected platform. Investors should seek information on:
- Whether the platform is registered as a national securities exchange
- Whether the platform operates as an ATS, is registered as a broker-dealer, and has filed a Form ATS, Initial Operation Report,Amendment To Initial Operation Report And Cessation Of Operations Report For Alternative Trading Systems, with the SEC
- Whether there is information in the Financial Industry Regulatory Authority, Inc. (FINRA) BrokerCheck ® system about any individuals or firms operating the platform
- How the platform selects digital assets for trading
- Who is permitted to trade on the platform.
The statement is available here.
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