Accounting Watchdog Agency Has Bookkeeping Problems of Its Own
The Securities and Exchange Commission, that venerable agency charged with ensuring that publicly held companies are accountable for their own bookkeeping correctness, now has to address some bookkeeping problems of its own.
In an internal audit of the SEC for the fiscal year that ended September 30, 2002, it was found that the agency did not live up to expected accounting standards when it came to recording employee-related costs. Salaries, expenses, employee benefit contributions, and other employee-related amounts were found to have "inappropriate balances" due to misclassifications in the agency's accounting records.
It was found that the SEC's accounting for employee costs did not comply with generally accepted accounting standards. The SEC will incur a cost of $500,000 to correct the accounting errors.
"These are flaws that we have been aware of and have been addressing, which is one reason we recently converted to a whole new accounting computer system," said Herb Perone, SEC spokesman.
The SEC is responsible for making sure that accounting standards are upheld at approximately 15,000 publicly held companies.
Cotton & Co. of Alexandria, VA, conducted the internal audit and found the errors. While there does not appear to be any loss or misappropriation of funds at the SEC, the Washington Post is reporting that Cotton & Co. auditors determined that the SEC lacks adequate controls over agency funds. For example, there is no verification process to determine if stock exchanges are paying the agency all they owe.
In addition, there may be a problem with the way in which the SEC has reported disgorgements - amounts that companies and individuals are required to pay the agency as a result of enforcement actions.
These bookkeeping issues may result in a restatement of SEC financial records for fiscal year 2002.
Voice of the Editor
Which isn’t completely true. I mean, occasionally I drop by when I manage to sneak out of the nonstop frat party over at Going Concern, but I’m mostly a wallflower over there. I’m happy to say that I’ve been given express permission (or explicit orders, if you like) to wander over here to AccountingWEB more often.
Why is that, you might ask? My job is to replace the irreplaceable Gail Perry as Editor-in-Chief. What does that mean? I don’t really know! I think it’ll be fun getting a feel for things, throwing in my own thoughts here and there, and listening to the discussions you’re having about the accounting profession.