Audit Readiness and Financial Controls for Broker-Dealers

We prepare firms for FINRA and SEC examinations, build internal controls over compliance and financial reporting, and provide hands-on FINOP consulting — built by a CPA and audit veteran who's been on both sides of the examination table.

Regulatory Exam Preparation

We run full mock examinations that mirror the scope and methodology of FINRA and SEC exams — document requests, staff interviews, testing procedures, and findings reports. The goal is to surface deficiencies before your examiner does. We also build remediation plans for prior exam findings, coordinate with your independent auditor, and prepare your team to respond to document production requests and on-site inquiries with confidence.

FINOP Consulting & Financial Operations

We provide outsourced and advisory FINOP services for firms that need Series 27 expertise without a full-time hire. That includes FOCUS Report preparation and filing, net capital computation under both the Basic and Alternative methods, customer reserve formula calculations under Rule 15c3-3, financial statement preparation, revenue recognition assessment under ASC 606, and year-end audit coordination. Every filing is accurate, on time, and defensible.

Internal Controls — ICOC & ICFR

For carrying broker-dealers, ICOC is a requirement — not a suggestion. We design, implement, and annually test internal controls over compliance with Rules 15c3-1, 15c3-3, and 17a-13. We also build ICFR frameworks for firms subject to Sarbanes-Oxley. That means control environment assessments, segregation of duties reviews, control mapping, material weakness identification and remediation, and documentation that satisfies both your auditor and your examiner.

Supervisory Testing & Annual Reviews

We build and execute the annual testing programs required under FINRA Rule 3120 — the layer that verifies your supervisory procedures actually work. That includes risk-based sampling methodology, testing across all business lines, exception documentation, and the annual report to senior management. We also support the CEO certification process under Rule 3130 and design annual compliance meeting programs under Rule 3110.

Books & Records Compliance

We audit your books and records program against SEC Rules 17a-3 and 17a-4 — blotter records, general ledger, stock records, customer account documentation, order tickets, and communications. We design retention schedules, assess electronic recordkeeping compliance including WORM requirements, and build oversight programs for third-party recordkeepers. With the SEC imposing $63 million in off-channel communication penalties in January 2025 alone, getting this right is no longer optional.

SOC Readiness & AML Reviews

We prepare firms for SOC 1 and SOC 2 examinations — gap assessments, control implementation, trust services criteria scoping, and ongoing examination support. SOC reports are increasingly expected by counterparties and institutional clients as evidence of operational and cybersecurity posture. We also conduct independent AML testing under FINRA Rule 3310, including BSA/AML program assessments, SAR filing quality reviews, and CDD/KYC evaluations.

Key Regulations

Rule 17a-5FOCUS / financial reporting
Rules 17a-3/4Books & records
Rule 3120Supervisory testing

Frameworks

ICOCControls over compliance
PCAOBAttestation standards
SOC 1 / SOC 2Trust services criteria
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What We See Most

After years conducting audits, preparing FOCUS reports, and building controls frameworks inside broker-dealers, these are the gaps we find most often — and the ones examiners find first.

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ICOC Programs That Exist on Paper Only

Controls documented in a binder but never actively tested, monitored, or updated. When the auditor examines your ICOC assertions, they need evidence of ongoing effectiveness — not a static checklist from two years ago.

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FOCUS Report Computation Errors

Misclassified assets and liabilities, incorrect haircut calculations, and improperly recorded revenue and expenses. A single net capital computation error can trigger a deficiency notice and immediate regulatory scrutiny.

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No Rule 3120 Testing Program

Firms that treat the annual supervisory review as a formality — or skip it entirely. FINRA expects documented testing methodology, risk-based sampling, exception reporting, and remediation tracking. The 3120 Report is an audit of your audit.

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Off-Channel Communication Gaps

Business-related texts, WhatsApp messages, and personal email that are never captured or retained. The SEC imposed $63 million in penalties in a single month in 2025. This is their top enforcement priority — and it starts with books and records.

66%

of broker-dealer audit engagements reviewed by the PCAOB in 2024 had deficiencies — up from 56% the prior year. Your firm's financial statements may carry audit risk you don't know about until it's too late.

PCAOB 2024 Broker-Dealer Inspection Spotlight

Common Questions
Yes. Any broker-dealer may engage an off-site Financial and Operations Principal. An outsourced FINOP team typically includes Series 27 licensees and CPAs who handle FOCUS Report preparation, net capital monitoring, customer reserve computations, financial statement review, and annual audit coordination. For small and mid-sized firms, this is often more cost-effective than a full-time hire — and gives you access to a deeper bench of specialized expertise than any single employee can provide.
ICOC — Internal Controls Over Compliance — focuses specifically on broker-dealer compliance with Rules 15c3-1 (Net Capital), 15c3-3 (Customer Protection), and 17a-13 (Quarterly Securities Counts). It is required for carrying broker-dealers, and your independent auditor must examine and report on your ICOC assertions under PCAOB attestation standards. ICFR — Internal Controls Over Financial Reporting — is a broader Sarbanes-Oxley requirement focused on preventing material misstatement in financial statements, applicable to firms that are part of public companies. Many controls serve both frameworks, but they have distinct scopes and reporting requirements.
Under FINRA Rule 3120, a designated principal must test and verify that your firm's written supervisory procedures are reasonably designed to achieve compliance. The review requires a documented testing methodology, risk-based sampling across all business lines, identification of significant exceptions, and a written report to senior management summarizing results and any procedural amendments made in response. This is distinct from the supervisory system itself — Rule 3120 is the testing layer that validates Rule 3110. Many firms treat it as a box-checking exercise, but examiners expect substantive, documented testing with clear evidence of follow-through.
The PCAOB found that 66% of broker-dealer audit engagements had deficiencies in 2024, and 76% of inspected firms had at least one deficiency. That means there is a meaningful probability that your firm's audit contains issues your auditor did not catch — even if they issued a clean opinion. Deficient audits can lead to restatements, regulatory action, and loss of confidence from FINRA and the SEC. Proactive audit preparation, strong internal controls, and independent oversight of the audit process reduce this risk substantially.
Start early and start with a mock examination. Review and remediate all prior exam findings. Ensure your WSPs and supervisory control procedures are current, tested, and documented. Verify FOCUS report accuracy and net capital computations. Confirm that AML independent testing is complete. Check that all required certifications — including the Rule 3130 CEO certification — are on file. Prepare key documents for production: customer complaints, correspondence, trade records, financial statements. Brief your staff on examination protocols. The firms that perform best in examinations are the ones that treat every day like exam day.

Ready to Strengthen Your Audit Posture?

Three founding partners. Six disciplines. One team dedicated to your firm's transformation.

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