Do As I Say, Not As I Do

Last week, the Government Accountability Office (“GAO”) released the results of its annual audit of the Securities and Exchange Commission (“SEC”).  In the audit report, the GAO identified six significant deficiencies in the SEC’s internal control over financial reporting.  The collection of these deficiencies amounted to a material weakness in the SEC’s internal control over financial reporting.  For those who are not familiar with the term “material weakness”, it represents a reportable event that must be disclosed by U.S. public companies as a result of the Sarbanes-Oxley Act of 2002.  Here is what the GAO detailed in their report.

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.

As the primary enforcement agency for accurate financial reporting by U.S. public companies, the SEC should be leading by example in creating processes that provide reliable financial information.  Sadly, this is not the case and has not been for the past several years.  Let’s hope SEC Chairwoman Mary Shapiro does a better job than former SEC Chairman Christopher Cox and can effect the necessary change within the agency.


About Wheelhouse Advisors
Wheelhouse Advisors LLC is the publisher of The ERM Current™, an online publication and blog dedicated to providing the latest updates on current trends in Enterprise Risk Management & Control. Wheelhouse Advisors provides cost-effective Enterprise Risk Management & Control solutions to both large and mid-size corporations. To learn more about Wheelhouse Advisors, please visit our web site at

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