announcements, companies typically file restatements
by amending their previously issued financial statements for the periods affected (known as "Big R" restatements
This raises the question of whether executive turnover following restatements
may be more likely in the current regime than in prior periods due to new or more stringent penalties imposed on companies and executives.
associated with fraud and revenue decreased after 2001.
Revenue "mis-recognition" is the leading cause of restatements
, with 1,295 restatements
in 2005, almost twice the number in 2004, reports Glass, Lewis & Co.
The number of restatements
has declined significantly since its peak in 2006, the number of accounting issues underlying each restatement
reported has also decreased, and the percent age of restatements
involving revenue recognition has leveled off to 10% of restatement
volume for the last several years.
For instance, how many of the 1,295 restatements
indicate fraud or intentional deception, vs.
The CBA regulations clarify that the reporting requirement applies to restatements
reporting the correction of any error for a:
Statistics show that only in recent years has the number of restatements
can also have dire consequences for the CFO and the outside auditors.
For example, CPAs are required to report any restatements
of financial statements by a client audited by the licensee and the other reportable events contained in Section 5063 of the Business and Professions Code.