The Public Company Accounting Oversight Board's Standing Advisory Group met to discuss reports addressing the audit implications of International Financial Reporting Standards in SEC filings, as well as changes in market responses to financial restatements post-Sarbanes-Oxley.
The first paper came in response to the SEC's proposal to no longer require companies to reconcile the financial statements they file in IFRS with U.S. generally accepted accounting principles. The PCAOB has been looking at the auditing implications. However, there are a number of wrinkles to consider.
"Until there is convergence, you're going to have a lot of misunderstanding in the marketplace," said Kenneth N. Goldmann, capital markets and SEC practice director at the audit firm J.H. Cohn, in an interview. "I predict it's going to require more study. Unfortunately, the concept of convergence is easier than the details. We're now in the details stage. People are looking at what they really need to do to comply. They understand there are more differences than they knew to exist previously."
The PCAOB also presented research on the market response to restatement announcements since the enactment of the Sarbanes-Oxley Act of 2002, as well as market efficiency and price volatility due to restatements. The study found that the reaction has been more muted in recent years to financial restatements. Post-SOX, the negative impact on companies announcing restatements has declined 71 percent on average, while the positive market response has fallen 33 percent. That translates into a net reduction in lost market value of $207 million per restatement announcement.
Another study, released independently, concurred with those findings. Financial Executives International and Baruch College found that 60 percent of the CFOs they surveyed agreed that there is less stigma attached to financial restatements now than five years ago.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access