Internal Control: Improvements Needed in SEC's Accounting and Operational Procedures Page: 1 of 22
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AGAO
Accountability * Integrity * Reliability
United States Government Accountability Office
Washington, DC 20548
April 3, 2007
The Honorable Christopher Cox
Chairman
U.S. Securities and Exchange Commission
Subject: Internal Control: Improvements Needed in SEC's Accounting and Operational
Procedures
Dear Mr. Cox:
On November 15, 2006, we issued our report1 on the U.S. Securities and Exchange
Commission's (SEC) fiscal years 2006 and 2005 financial statements and on SEC's internal
control as of September 30, 2006. We also reported on the results of our tests of SEC's
compliance with selected provisions of laws and regulations during fiscal year 2006.
The purpose of this report is to discuss issues identified during our fiscal year 2006 audit
concerning internal controls and accounting/operational procedures that could be improved.2
This report contains six recommendations to SEC to improve these internal controls and
procedures. These recommendations are in addition to those we already provided to SEC as a
result of our prior audits of SEC's financial statements.3
Results in Brief
Our November 15, 2006, report concluded that based on SEC's efforts to address concerns
with controls over disgorgements and penalties and over information systems, and based on
improvements that we found in these areas during the fiscal year 2006 audit, we no longer
considered these two previously reported weaknesses to be material weaknesses.4 However,
1 GAO, Financial Audit: Securities and Exchange Commission's Financial Statements for Fiscal Years 2006
and 2005, GAO-07-134 (Washington, D.C.: Nov. 15, 2006).
2 The internal control issues concerning information security are discussed in a separate report: GAO,
Information Security: Sustained Progress Needed to Strengthen Controls at the Securities and Exchange
Commission, GAO-07-256 (Washington, D.C.: Mar. 27, 2007).
3 Recommendations were addressed in our internal control reports issued as part of our fiscal year 2004 and
2005 SEC financial statement audits: GAO, Material Internal Control Issues Reported in SEC's Fiscal Year
2004 Financial Statement Audit Report, GAO-05-691R (Washington, D.C.: July 27, 2005); Management
Report: Opportunities for Improvements in SEC's Internal Controls and Accounting Procedures, GAO-05-
693R (Washington, D.C.: Aug. 12, 2005); and Internal Control: Improvements Needed in SEC's Accounting
and Financial Reporting Procedures, GAO-06-459R (Washington, D.C.: Apr. 21, 2006).
4 A material weakness is a condition in which the design or operation of one or more of the internal control
components does not reduce to a relatively low level the risk that errors, fraud, or noncompliance in amountsGAO-07-482R SEC Management Letter
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United States. Government Accountability Office. Internal Control: Improvements Needed in SEC's Accounting and Operational Procedures, text, April 3, 2007; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc295437/m1/1/: accessed March 29, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.