Accounting Restatements Rise
One in 10 publicly traded companies made financial restatements because of accounting irregularities in the last five years, the U.S. General Accounting Office said Wednesday.
Annual restatements from accounting irregularities will increase 170% to a projected 250 by the end of 2002 from 92 in 1997, the report says.
The report cited weaknesses in corporate management at the restating companies, with auditors and boards of directors failing in their roles, along with securities analysts and credit-rating agencies that did not find problems in time.
The GAO report showed the restatement trend began earlier than the spectacular 2001 implosion of Enron Corp. and this year’s WorldCom Inc. bankruptcy, with 1999 restatements jumping 71% to 174 from 102 in 1998.
Sen. Paul S. Sarbanes (D-Md.), who requested the report, said the findings made it more important than ever that the Securities and Exchange Commission name persons of integrity to a new oversight board set up under the Sarbanes-Oxley Act.
The SEC said Tuesday that it had filed 598 enforcement actions for fiscal 2002, which ended Sept. 30, a 24% jump from 484 the year before.
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