SEC Grades Year 2000 Compliance Efforts
The Securities and Exchange Commission issued a report on the readiness of the securities industry, including the SEC, for year 2000 information technology challenges. Most computer hardware, such as mainframes and personal computers, use a two-digit internal clock that will not roll over to the year 2000. The report, Readiness of the United States Securities Industry and Public Companies to Meet the Information Processing Challenges of the Year 2000, presents the positions of a special task force of the SEC staff.
According to the report, the majority of members of the securities industry were involved in assessing year 2000 compliance or already taking steps to remedy the problem. However. the report said few companies were completely prepared and a few had only recently become aware of the problem. Most of the SEC staff agreed the remediation efforts were moving along quickly enough.
At a press conference following the report's release, Congressman John D. Dingell (D-Mich.), who had requested the SEC issue such a report, said that while there appeared to be a high level of awareness and activity, the lack of progress in many areas was troubling. He said it is unclear whether this is due to lack of management attention, the high costs of conversion or competition for the pool of the best-qualified systems experts.
The report warned that the problem was too complex for companies to guarantee to have achieved complete year 2000 compliance. According to the report, efforts to solve year 2000 problems are best described as "risk management." Nonetheless, Dingell urged companies to set up contingency plans.
Standards and disclosure
The task force considered the connection of the year 2000 problem and the auditing, independence and accounting standards of public companies. After consulting with members of the accounting profession, including the American Institute of CPAs (see box below), the task force concluded that current standards alert management, investors and other users of financial information to the problem's seriousness. …