After a review of its stock-option practices, Aon announced that it will restate its financials for 2003, 2004, 2005, and the first three quarters of 2006.

Last month, the insurance broker elaborated, it disclosed that incorrect measurement dates for certain stock options granted in 2000 and earlier “appeared to have been used for financial accounting purposes.” At that time, Aon’s audit committee undertook a comprehensive review of the company’s practices regarding option grant dates and related accounting.

As a result, Aon stated, it would increase compensation expense by $3 million for 2005 and $2 million for 2006. The company concluded that the impact of corrected compensation expense is not material to any reporting period. Aon also found, however, that the “cumulative impact of the delegated grants and other administrative errors” for 1994 to 2006 — $66 million, pretax — is sufficiently material to warrant restatement.

The company stressed that its review found no misconduct by current or former management or directors.

The review did reveal a limited number of instances in which options were granted as of a prior date to honor employment or other previously made contractual commitments. But even in these cases, Aon maintained, no evidence was found that the selection of grant dates was motivated by pricing considerations.

The company also stated that additional noncash stock-based compensation expense and related tax effects regarding past option grants would result in after-tax adjustments of $2 million for fiscal year 2005, $3 million for 2004, $9 million for 2003, and $10 million for 2002.

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