Mises Wire

SEC: The Great Overseer Fails in Oversight of Self

SEC: The Great Overseer Fails in Oversight of Self

Today it was announced that the Securities and Exchange Commission (SEC) had a material weakness in the internal controls over its financial reporting. The SEC avoided a big fat "E" last year via its remediation of internal control problems, but this year the SEC's material weaknesses included control deficiencies related to its accounts receivable balances, "period-end closing process, accounting for transaction fee revenue, and preparation of financial statement disclosures."

Now, since the SEC implements and enforces the provisions of Sarbanes-Oxley 404 (which requires management to report on its internal controls over financial reporting), how can this inept organization possibly be trusted to oversee that which it can't manage within its own organization?

Non-compliance with 404 has been disastrous for private companies that have had material weaknesses (massive stock declines and even bankruptcy), however, the SEC, which is not subject to market forces, has responded with this: "During fiscal year 2007, SEC improved its controls over the accuracy, timeliness, and completeness of the disgorgement and penalty data and used a much improved database for the initial recording and tracking of these data." Ummm, so? This is like throwing fluff at a charging rhino.

All Rights Reserved ©
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
Support Liberty

The Mises Institute exists solely on voluntary contributions from readers like you. Support our students and faculty in their work for Austrian economics, freedom, and peace.

Donate today
Group photo of Mises staff and fellows