Are companies having more trouble getting their quarterly filings out on time?
According to shareholder-advisory firm Glass, Lewis, for the quarter ended March 31, 77 companies whose market caps exceed $100 million filed for an extension — more than double the 36 companies that sought more time one year earlier. For the first quarter, the filing deadline was May 10.
For the fourth quarter of 2004, a whopping 282 companies filed for an extension, added the report.
Glass, Lewis pointed out that 39 of the 77 companies were repeat offenders from recent filing deadlines; 29 — including BearingPoint, Delphi Corp., Fannie Mae, and HealthSouth — cited previously announced restatements.
Another 10 companies have identified accounting issues that Glass, Lewis believes could lead to a restatements. A further 14 companies still haven’t completed their 2004 annual assessment of internal controls or were still correcting weaknesses found during those reviews.
Glass, Lewis also stressed that quarterly financial statements are not subjected to the same stringent audit procedures as annual financials. For example, independent audit firms are required only to review the financials and related disclosures in quarterly reports. “In our opinion, a review is much like an aerial observation from 10,000 feet,” said the firm. “Many of the small details that might be noticed in a thorough audit may not be caught in review procedures.”
As a result, noted Glass, Lewis, a company’s request to delay its filing because its auditor cannot complete a quarterly review should be viewed with a heavy dose of skepticism.
In general, a company that doesn’t file its report within the five-day extension period is deemed no longer in compliance with Securities and Exchange Commission regulations and may be subject to defaulting on bank loans as well as delisting from national exchanges.