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GAO-07-482R 1 (2007-04-03)

handle is hein.gao/gaocrptauzf0001 and id is 1 raw text is: SGAO 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 report' 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 andAccounting Procedures, GAO-05- 693R (Washington, D.C.: Aug. 12, 2005); and Internal Control: Improvements Needed in SEC'sAccounting and Financial Reporting Procedures, GAO-06-459R (Washington, D.C.: Apr. 21, 2006). ' 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 GAO-07-482R SEC Management Letter

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