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GAO-05-693R 1 (2005-08-12)

handle is hein.gao/gaocrptarux0001 and id is 1 raw text is: SGAO Accountability * Integrity Reliability United States Government Accountability Office Washington, DC 20548 August 12, 2005 Margaret J. Carpenter Associate Executive Director Office of Financial Management U.S. Securities and Exchange Commission Subject: Management Report: Opportunities for Improvements in SEC's Internal Controls and Accounting Procedures Dear Ms. Carpenter: In May 2005, we issued our report expressing an opinion on the Securities and Exchange Commission's (SEC) fiscal year 2004 financial statements and an opinion on SEC's internal control as of September 30, 2004.' We also reported on the results of our tests of SEC's compliance with selected provisions of laws and regulations during fiscal year 2004. Our report on SEC's fiscal year 2004 financial statements identified reportable conditions in the internal controls over financial reporting that we considered to be material weaknesses. These weaknesses related to SEC's controls over (1) recording and reporting disgorgements3 and penalties,4 (2) information security, and (3) preparing financial statements and related disclosures. We issued two separate reports providing recommendations to address those weaknesses.5 The purpose of this report is to provide recommendations for those issues identified during our audit that, although not material in relation to the financial statements, we believe warrant management's attention. We are making 16 recommendations in this ' GAO, Financial Audit: SEC's Fiscal Year 2004 Financial Statements, GAO-05-244 (Washington, D.C.: May 26, 2005). 2 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 amounts that would be material to the financial statements may occur and not be detected promptly by employees in the normal course of their duties. 3 A disgorgement is the repayment of illegally earned profits. 4 A penalty is a monetary sum that is to be paid by the registrant to SEC as a result of a security law violation. GAO, Material Internal Control Issues Reported in the SEC's Fiscal Year 2004 Financial Statement Audit Report, GAO-05-691R (Washington, D.C.: Aug. 27, 2005), and GAO, Information Security: Securities and Exchange Commission Needs to Address Weak Controls over Financial and Sensitive Data, GAO-05-262 (Washington, D.C.: Mar. 23, 2005). GAO-05-693R SEC Management Report

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