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The AAO Weblog covers accounting issues and current events as they relate the practice of investment analysis. All posts prior to September, 2007 are in the public domain, but after September 4, 2007, only subscribers to The Analyst's Accounting Observer will see all posts going forward. Only selected, occasional posts will be released to the public domain from September 4 forward.

Regulator, Regulate Thyself
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Posted by: Jack Ciesielski 7/29/2005 7:00 AM
There will be a lot of chuckling CFOs and controllers who hear about this...

The General Accountability Office performed its first audit of the Securities & Exchange Commission and released its report yesterday. Its findings: a clean opinion on the financial statements; an adverse opinion on internal controls. From the summary:

"...GAO identified inadequate controls over SEC's financial statement preparation process including a lack of sufficient documented policies and procedures, support, and quality assurance reviews, increasing the risk that SEC management will not have reasonable assurance that the balances presented in the financial statements and related disclosures are supported by SEC's underlying accounting records. In addition, GAO identified inadequate controls over SEC's disgorgements and civil penalties activities, increasing the risk that such activities will not be completely, accurately, and properly recorded and reported for management's use in its decision making.

GAO also found that SEC has not effectively implemented information system controls to protect the integrity, confidentiality, and availability of its financial and sensitive data, increasing the risk of unauthorized disclosure, modification, or loss of the data, possibly without detection. The risks created by these information security weaknesses are compounded because the SEC does not have a comprehensive monitoring program to identify unusual or suspicious access activities ..."

Rather ironic in view of the "material control weaknesses" that have been a steady drumbeat in the past year.
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