Square-Off: What Kind of Corporate Tax Is Best?
With the Democratic and Republican Presidential conventions coming up soon, the perennial question of what to do about corporate taxes has predictably entered center stage. Gary Johnson, the Libertarian candidate for president, wants to abolish corporate and personal income taxes, substituting a single consumption tax to pay for all federal government costs. An American Enterprise Institute proposal would link corporate tax liability closely to where shareholders live. Proposals to broaden th ..
Philip G. Cohen
The Government Accountability Office said Monday that the Securities and Exchange Commission had a material weakness in the internal controls over its financial reporting.
The GAO’s report said that data related to accounts receivable balances is processed manually at the SEC in a manner that is prone to error and could result in inaccurate financial reporting by the agency. The news is a blow to the SEC, which was criticized by the GAO in 2006 for the same manual processes, but narrowly avoided a material weakness by putting in place extra controls to compensate for them. The GAO said those controls were not effective in 2007.
The GAO added that the SEC’s material weakness also included other control deficiencies related to the SEC’s period-end closing process, accounting for transaction fee revenue and preparation of financial statement disclosures.
The news is also a moral blow the agency, which is responsible for implementing and enforcing the provisions of the Sarbanes-Oxley Act for publicly-listed companies. Section 404 of the act requires that companies maintain internal controls over financial reporting, and requires its CEO and CFO to attest to their effectiveness.
In response, SEC chairman Christopher Cox said that in 2008 the commission will introduce new software systems designed to eliminate the material weakness in the SEC’s internal controls. “The SEC intends to remediate this material weakness before the end of fiscal 2008 and to address each of the findings and recommendations identified during the audit,” said Cox in a letter to Comptroller General David Walker.
In its latest report, the GAO assured that the SEC’s financial statements for fiscal 2007 and 2006 were fairly presented. It also noted that the SEC maintained effective internal control over compliance with laws and regulations material to its financial statements as of September 30, 2007. And the GAO did not find reportable instances of noncompliance with the laws and regulations it tested.
In its 2006 report, the GAO reported on weaknesses in the SEC’s information systems controls, recording and reporting of disgorgements and penalties, and property and equipment controls.
The SEC made significant progress on addressing those concerns, according to the GAO. “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,” the GAO reported.