The total number of 2005 restatements works out to one restatement for every 12 public companies.
Stephen Taub, CFO.com | US
March 3, 2006
In reading the article on the increase in restatements, is it possible that the Independent Registered Public Accountants (IRPAs) who issued the original clean opinions on all of the misstated financial statements during the midst of SOX 404 implementation have no responsibility for the original misstatements? I would surmise that many of the original misstatements have much to do with IRPAs not doing their GAAP work well, especially as it relates to smaller company misstatements. I find it difficult to believe that CFO’s operating under the new Sarbanes-Oxley penalties negligently misstated their company’s financial statements without the concurrence of their IRPAs. Is the SEC saying that smaller companies need to hire accountants or accounting consultants with more financial reporting expertise than their IRPA firms have to be able to assure correct financial reporting? Public company financial statements go through three levels of financial statement disclosure review by the IRPAs after the company’s accountants prepare them. Where were the internal controls over financial reporting in the IRPA firms? If IRPAs are so stretched that they cannot detect GAAP reporting errors, no wonder we have had such a debacle in the implementation of SOX 404 for two years. Maybe the IRPAs need to implement better GAAP and SOX 404 reporting controls within their own firms before they have the responsibility of attesting to non-existent SOX 404 rules for 6000 smaller companies. The nature of the restatements in the article appears to have more to do with IRPAs failure to detect the improper application or understanding of GAAP by company’s accountants. This article on increased misstatements is a strong indicator that IRPAs and smaller company accountants need simpler rules and additional time to effectively implement SOX 404 as recommended by the SEC Advisory Committee for Smaller Companies. Sincerely, /s/ Robert B. Briscoe Robert B. Briscoe Chief Financial Officer The Savannah Bancorp, Inc. 912-629-6525 firstname.lastname@example.org
Posted by Robert Briscoe | March 07, 2006 06:47 pm
"When so many companies produce inaccurate financial statements, it seriously calls into question the quality of information that investors relied upon to make capital-allocation decisions". Inaccurate financial statements calls into question how many corporate employees understand what gets reported, and how, on a Financial Statement. What is seriously called for is basic financial education of anyone and everyone who is employed. 80% of the population are honest. 80% of employees are more likely to be financially illiterate than they are to be dishonest. Instead of questioning what they don't understand about financial reporting, they enter data inaccurately. After many years of providing basic financial training online, this is the situation, and before anyone can comply to Sarbanes Oxley, they have to be financially literate.
Posted by Jessica Byrnes | March 07, 2006 09:34 am© CFO Publishing Corporation 2009. All rights reserved.