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GAO-03-982R 1 (2003-09-03)

handle is hein.gao/gaobaamhe0001 and id is 1 raw text is: I Accountability * Integrity * Reliability United States General Accounting Office Washington, DC 20548 September 3, 2003 The Honorable John D. Dingell Ranking Minority Member Committee on Energy and Commerce House of Representatives Subject: Securities Exchange Act: Review of Reporting Under Section IOA Dear Mr. Dingell: This report responds to your request that we update our February 4, 2000, report1 on reporting under Section 10A of the Securities Exchange Act of 1934. As you know, Section 10A requires reporting to the Securities and Exchange Commission (SEC) when, during the course of a financial audit, an auditor detects likely illegal acts that have a material impact on the financial statements and appropriate remedial action is not being taken by management or the board of directors. In addition to reporting on the number of Section 10A reports submitted to the SEC and the status of SEC actions pertaining to Section 1OA reports, we also agreed with your office to report on the current initiatives by the accounting profession pertaining to the auditor's responsibility for detecting fraudulent financial reporting. On October 1, 2002, we briefed your office on the number of Section 1OA reports submitted to the SEC since our last report. This report responds to your February 25, 2003, request that we update that work, which we have updated to reflect Section 1OA reports submitted to the SEC through May 15, 2003. Results in Brief The Section 1OA reporting requirements first became effective for fiscal years beginning on or after January 1, 1996. Since our February 2000 report, the SEC has received an additional 23 10A letters, bringing the total received since the requirement was implemented through May 15, 2003, to 29. Of the 29 SEC registrants named in the reports, 10 are currently subjects of active SEC enforcement investigations, 8 have had actions brought against them by the SEC, and 11 of the Section 1OA reports were closed without formal action being taken by the SEC. According to SEC officials, all Section 1OA reports are investigated. In some instances, the SEC took no formal action. However, the registrants, as a result of discussions with the SEC, took remedial action that the SEC found satisfactory. Through May 15, 2003, the SEC had filed seven actions against auditors for alleged violations of Section 1OA for 1 U.S. General Accounting Office, Securities Exchange Act. Review ofReporting Under Section 10A, GAO/AIMD-00-54R (Washington, D.C.: Feb. 4, 2000). GAO-03-982R Review of 10A Reporting

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