Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, November 17, 2009

GAO Reports SEC's Continuing Lack of Effective Internal Controls over Financial Reporting

The GAO released today its audit of the SEC's Financial Statements for Fiscal Years 2009 and 2008.  In the GAO’s opinion, SEC’s fiscal years 2009 and 2008 financial statements are fairly presented in all material respects. However, in GAO’s opinion, SEC did not have effective internal control over financial reporting as of September 30, 2009.

The report goes on to state:

During this year’s audit, we identified six significant deficiencies that collectively represent a material weakness in SEC’s internal control over financial reporting. The significant deficiencies involve SEC’s internal control over (1) information security, (2) financial reporting process, (3) fund balance with Treasury, (4) registrant deposits, (5) budgetary resources, and (6) risk assessment and monitoring processes. These internal control weaknesses give rise to significant management challenges that have reduced assurance that data processed by SEC’s information systems are reliable and appropriately protected; impaired management’s ability to prepare its financial statements without extensive compensating manual procedures; and resulted in unsupported entries and errors in the general ledger.

In connection with its prior audits, GAO made numerous recommendations to SEC to address the internal control issues that continued to persist during fiscal year 2009. GAO will continue to monitor SEC’s progress in implementing the recommendations that remain open as of the date of this report.

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