For a broker dealer, there’s a single word that is synonymous with death and taxes….Audit. Every broker dealer needs to be prepared for audits. Whether it is the annual independent audit or a regulatory audit, audits will happen. Your broker dealer’s Financial and Operations Principal (“FINOP”) plays a vital role in ensuring compliance with regulatory requirements and maintaining accurate financial records. There are several considerations for your broker dealer’s FINOP as it pertains to audits.

Review Regulatory Requirements: A FINOP should do a thorough review of the regulatory requirements that are applicable to your broker dealer. This includes requirements as set forth by the Financial Industry Regulatory Authority (“FINRA”) and the Securities and Exchange Commission (“SEC”). Understanding the regulations that govern your broker dealer is essential for compliance and audit readiness.

Organize Financial Records: A FINOP should maintain organized financial records throughout the year to help facilitate that audit process. This includes keeping records of transactions, account statements, reconciliations, and other relevant documentation. Organizing these documents in a systematic manner will help streamline the audit process and allow for easy access for auditors.

Coordinate with External Auditors: Establishing open lines of communication is vital for a FINOP and the external auditors. This allows the FINOP to efficiently provide auditors with access to financial records and address any questions and/or concerns that the auditors may have. Collaboration between the FINOP and the auditors is paramount for a smooth audit process.

Perform Mock Audits: All broker dealer staff that play a relevant role in an audit should come together and perform routine mock audits. This includes the FINOP. An internal mock audit will identify any gaps or areas for improvement. This process allows the team to address any potential issues proactively and be better prepared when an actual audit happens.

When it comes to audits, a broker dealer’s FINOP will play a vital role in ensuring a smooth process for everyone involved. By following the steps outlined above, FINOPs can effectively prepare for audits, demonstrate compliance with regulatory requirements, and help facilitate an efficient audit process for everyone involved. Being prepared and having a strong attention to detail are key to achieving a successful outcome.

At Securities Compliance Management, our team of FINOP professionals can help your broker dealer bring its financial programs and procedures up to par with regulatory requirements, and help your firm proactively prepare for audits as they arise. Do not get caught unprepared when an audit is announced. For more information, please contact SCM here to learn more about our accounting and FINOP services, and how these services can best help your broker dealer succeed.