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GAO-06-459R 1 (2006-04-21)

handle is hein.gao/gaocrptatdw0001 and id is 1 raw text is: i= i Accountability * Integrity * Reliability United States Government Accountability Office Washington, DC 20548 April 21, 2006 The Honorable Christopher Cox Chairman U.S. Securities and Exchange Commission Subject: Internal Control: Improvements Needed in SEC's Accounting and Financial Reporting Procedures Dear Mr. Cox: On November 15, 2005, we issued our report' on the U.S. Securities and Exchange Commission's (SEC) fiscal years 2005 and 2004 financial statements and on SEC's internal control as of September 30, 2005. We also reported on the results of our tests of SEC's compliance with selected provisions of laws and regulations during fiscal year 2005. The purpose of this report is to discuss issues identified during our fiscal year 2005 audit concerning internal controls and accounting procedures that could be improved.2 This report contains 14 recommendations that we are proposing SEC implement in order to improve its internal controls and accounting procedures. These recommendations are in addition to those we already provided to SEC as a result of our prior audit of SEC's financial statements. Results in Brief Our November 15, 2005, report concluded that SEC continues to face the same 4. material weaknesses in internal control that we reported as part of our audit of ' GAO, Financial Audit: Securities and Exchange Commission's Financial Statements for Fiscal Years 2005 and 2004, GAO-06-239 (Washington, D.C.: Nov. 15, 2005). 2 The internal control issues concerning information security are discussed in a separate report: GAO, Information Security: Securities and Exchange Commission Needs to Continue to Improve Its Program, GAO-06-408 (Washington, D.C.: Mar. 31, 2006). 'Recommendations were addressed in our internal control reports issued as part of our fiscal year 2004 SEC financial statement audit: 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). 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 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. GAO-06-459R Internal Control

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