Common Audit Findings and How to Address Them
Broker dealer audits can reveal gaps you didn’t know existed. Whether it’s documentation issues, late filings, or supervisory shortfalls, each one signals a breakdown in your firm’s internal controls. These findings don’t just delay approval– they can lead to disciplinary action or costly remediations. Understanding where firms most often fall short helps you prevent mistakes before the audit begins.
Inadequate Supervisory Systems
Supervision remains one of the most frequently cited issues in broker-dealer audit services. Regulators expect a supervisory structure that’s strictly followed. Many findings stem from outdated procedures, unclear responsibilities, or lack of documentation when issues arise. If your written supervisory procedures aren’t tied to current workflows, or if you can’t show evidence of ongoing oversight, you’re at risk. Audit-ready firms train regularly, update procedures often, and document follow-through at every level.
Late or Incomplete Filings
Timeliness is critical in the broker-dealer space. Late filings, including financials, amendments, and Form U4 updates, are among the most common and preventable audit findings. FINRA and SEC systems track filing dates closely, and excuses rarely change the outcome. Firms that excel in this area usually assign clear responsibility for every required filing and use automated reminders to stay ahead of deadlines. A missed filing may seem small, but it signals bigger control issues and puts you on the radar for further scrutiny.
Books and Records Deficiencies
Your firm’s ability to maintain accurate, accessible records is essential. Missing blotters, unsigned agreements, or unclear ledger entries raise red flags. Auditors expect to find records and understand them without guesswork. Poor indexing, inconsistent file formats, or failure to retain required documents can all lead to citations. Strong recordkeeping starts with clear procedures, centralized access, and periodic testing to ensure nothing falls through the cracks.
Net Capital and Reserve Issues
Financial compliance remains core to every audit. Missteps around net capital calculations or reserve requirements often lead to significant findings. These issues typically arise from misapplied formulas, unrecognized liabilities, or poor documentation of adjustments. To avoid these errors, firms need a deep understanding of capital rules and reliable reconciliation processes. In some cases, audit findings result from relying on outdated spreadsheets or a single point of failure in the accounting flow. Redundancy, clear audit trails, and third-party validation can all help reduce this risk.
Communication and Outside Business Activities
Auditors also examine communications– both internal and with clients– and look closely at disclosures around outside business activities. Failures to supervise or disclose these areas are often cited. Review your firm’s practices for email review, social media use, and OBA reporting. Small oversights here can lead to bigger reputational risks if not corrected early. Make sure each policy has a matching process, and that staff know exactly what needs to be reported.
Audit readiness isn’t about perfection– it’s about consistency and control. Common findings often reflect system breakdowns, not bad actors. When your firm addresses risk areas in advance, stays up to date with rules, and shows evidence of internal oversight, audits become smoother– and your operation becomes stronger.