Financial Fraud Detection and Disclosure Act of 1986

Financial Fraud Detection and Disclosure Act of 1986 - Amends the Securities Exchange Act of 1934 to require every issuer of a registered security to: (1) maintain a system of internal administrative controls to ensure that it operates in accordance with applicable law; (2) evaluate such system and its system of internal accounting controls periodically; and (3) include in its annual report to the Securities and Exchange Commission (SEC) an evaluation indicating whether such systems ensure that receipts and expenditures comply with applicable law and identifying any material weaknesses in such systems and the plans for, and progress made in, correcting such weaknesses.

Prescribes auditing standards for the detection and disclosure of financial illegalities or irregulaties in documents and records required under the securities laws. Directs an auditor to: (1) inform an issuer's management of a suspected illegality or irregularity; (2) review the issuer's response; and (3) report such illegality or irregularity to appropriate regulatory and law enforcement authorities, unless satisfied that the issuer has established that the suspected illegality or irregularity has not occurred or has taken steps to correct or prevent the recurrence or continuance of the illegality or irregularity and to report the illegality or irregularity to such authorities. Directs the SEC to report to the Attorney General or other appropriate Federal, State, or local enforcement and regulatory authorities any illegality of which it is informed.