RESTATEMENTS DECLINED IN 2007Sutton, Mass. — The number of financial restatements fell last year for the first time since 2001, according to a new report.
Research firm Audit Analytics found that 1,109 different companies made a total of 1,237 restatements in 2007, a 31 percent decrease in the number of restatements and a 30 percent drop in the number of companies, compared to 2006. The trend indicated that publicly traded companies are finally adapting to more rigorous financial reporting conventions, such as those imposed by Section 404 of the Sarbanes-Oxley Act.
“It looks like SOX 404 is working to some extent,” said Don Whalen, director of research at Audit Analytics. “That's what the SEC would hope.”
Increasingly, a larger proportion of restatements is coming from U.S. non-accelerated filers, as opposed to U.S. accelerated filers. In 2005, 57.61 percent of U.S. restatements came from non-accelerated filers. In 2006, that figure rose to 67.83 percent. In 2007, the figure rose to 71.80 percent. However, the overall number of restatements has continued to decline.
The past two years have also seen a drop in the severity of restatements. In 2005, the typical restatement had a negative impact of $21.22 million, while in 2006 the figure was down to $17.81 million and in 2007 to $3.64 million.
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