Wednesday, April 09, 2008

Blame for restatements may need a rethinking

The growing number of companies restating their financial results has been cited as a reason to ease U.S. accounting standards by the Securities and Exchange Commission and Treasury Department. But the restatement problem may not be the big bad wolf it was originally thought to be.

Two studies released recently indicate that not only have restatements begun to decline, but they may be caused more by basic company errors than by complex accounting standards that companies have a hard time applying. Although proponents of reducing accounting complexity still think restatements are a problem, the studies could provide ammo for those looking to preserve the current regime.

According to one of the studies, released in February by Audit Analytics, an independent research firm in Sutton, Mass., restatements declined last year for the first time since 2001, with only 1,237 restatements disclosed. That was the lowest level in three years and marked a 30% drop from the 1,801 restatements that public companies disclosed in 2006. It was also lower than the 1,545 restatements in 2005, but higher than the 1,029 restatements in 2004.

...the move toward converging U.S. generally accepted accounting standards with international financial reporting standards may result in the need for more management judgment. And, since management judgment is a big, though not overwhelming, cause of restatements, more judgment could mean more restatements.

Labels: Audit Analytics, management judgement, restatement studies, SEC (Securities and Exchange Commission)

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Sunday, March 16, 2008

Proposed Restatement Guidelines Draw Investor Alarm

Investor advocates are wary of a regulatory proposal that could decrease the number of times companies restate their financial results.

Barbara Roper, director of investor protection for the Consumer Federation of America, contends that the suggested changes to the Securities and Exchange Commission's nearly 10-year-old materiality guidance — which companies rely on to calculate an error's effect on financial statements — will likely reduce transparency and encourage "shoddy practices" by unscrupulous companies.

Proposed Restatement Guidelines Draw Investor Alarm

Labels: restatement, SEC (Securities and Exchange Commission)

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Saturday, February 23, 2008

Small companies also can benefit from Sarbanes-Oxley

If you listened carefully, you could almost hear the collective sigh of relief from 5,000 smaller public companies when Securities and Exchange Commission (SEC) Chairman Christopher Cox proposed yet another extension to the Sarbanes-Oxley (SOX) deadline for an external audit of Internal Control over Financial Reporting (ICFR).

The SEC previously appeared to be steadfast in upholding the set deadline for non-accelerated filers, or public companies with less than $75 million in public float, even though the business community continued to complain that SOX was too costly. The SEC is expected to vote on Cox’s proposal early this year and decide if that sigh of relief was premature.

Small companies also can benefit from Sarbanes-Oxley

Labels: 404 delay, SEC (Securities and Exchange Commission), small business

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