A study by audit research firm AuditAnalytics found that the number of restatements filed by large companies -- those with market capitalization of more than $700 million -- fell 20 percent in 2006, the first decline since 2001.

However, overall, publicly traded companies filed 1,876 restatements of financial results in 2006, a record for corrections of financial statements.

Large companies filed 196 restatements last year, while companies with a market value of less than $75 million filed 1,108 restatements in 2006, a 42 percent year-over-year increase.

According to AuditAnalytics, a total of 1,876 restatements from both U.S. and foreign companies were filed with the Securities and Exchange Commission last year. That’s up 17 percent from 2005, and dwarfs the 452 restatements filed in 2001 before the passage of the Sarbanes-Oxley Act and enactment of the internal control requirements outlined in the legislation.

For smaller companies, the measurement and recognition of debt and stock or equity instruments caused the most errors, accounting for about 27 percent of total restatements. For larger companies, restatements related to compensation issues were the biggest problem, with problems related to the backdating of stock options accounting for 38 percent of 2006 restatements. Accounting for cash-flow statements, as well as tax issues, each led to more than 20 percent of restatements for the large companies.

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