Summary: 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. 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
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. However, because many of these efforts represent compensating controls rather than permanent systemic solutions, we still considered these areas to be reportable conditions. We also concluded that SEC had taken sufficient action in the area of controls over the financial reporting process such that we no longer consider this issue to be a material weakness or reportable condition. In addition, we identified a new reportable condition concerning SEC's controls over recording property and equipment. We also identified other internal control issues that although not considered to be material weaknesses or reportable conditions, we believe warrant management's consideration. These issues concern (1) payroll system access, approval of time and attendance records, and process documentation and (2) comparison of furniture and equipment received and ordered.
