Last Updated Apr 14, 2008 7:11 PM EDT
In 1997, 116 public companies went back over the accounting
books and restated their financials because internal audits uncovered errors,
or worse, fraud. In 2006, nearly 2,000 restated. The Sarbanes-Oxley Act, passed
in the wake of accounting scandals at Enron and WorldCom, in part explains the
dramatic uptick in restatements. The law strengthened the rules for corporate
financial governance and required extensive (and expensive) external audits,
creating new accounting challenges for big companies. Even now that the SEC has
relaxed some Sarbox requirements, compliance is still tripping up CFOs, and
restatements are scaring shareholders. To help your business cope, we've
compiled five articles that examine the new world of financial reporting.
Restate and Main: Is Your Company Vulnerable?
Source: CFO Publishing
This column from CFO Publishing looks at the nitty-gritty
behind restatements: exactly how much they have increased and why certain types
of companies are more likely to have to go back over their books.
What Triggers Financial Restatements?
Source: Penton Media
The list of common problems that lead to faulty accounting
is long. But the bigger issue may have more to do with the evolving job
descriptions of finance staff. In recent years, companies have added strategy
to the list of their accountants’ responsibilities, leaving less time
for traditional number-crunching.
Prepare for the Worst
When a company announces a
financial restatement, the fallout can be quick and brutal. This in-depth study
lays out the potential consequences, including the collapse of the company’s
stock price, class-action lawsuits, management turnover, and lower earnings
Uncovering the Culture Behind Fraudulent Financial Reporting
Source: The CPA Journal
Financial restatements are bad for the credibility of the
U.S. financial reporting process. They can undermine public confidence in the
markets and be disastrous for the company itself. Despite the risks, certain
companies have instituted policies of financial fraud. This article from The
CPA Journal identifies what these firms have in common.
Fraud or Error? The Case of MicroStrategy
This study by Loyola Marymount University professor Sudha
Krishnan takes a detailed look at the events that led up to software vendor
MicroStrategy’s restatements of nearly two years of financial