CAQ Study Shows Big Drop in Financial Restatements
Evaluating financial restatement trends over the ten-year period after the Sarbanes-Oxley Act’s (SOX) implementation, the Center for Audit Quality (CAQ) recently released the findings of its study, Financial Restatement Trends in the United States: 2003–2012. Authored by University of Kansas Professor Susan Scholz, the report focuses on restatement activity that was disclosed by U.S. Securities and Exchange Commission-registered filers. Per Scholz’s analysis and findings, it was determined that financial restatements have dramatically decreased over the years. Major takeaways from the report include the following:
- Contributed to the implementation of SOX Section 404 internal control reporting, restatement announcements reached its peak in 2006.
- Since SOX was implemented, the volume of 4.02 restatements dropped by 86 percent (255 reported in 2012 vs. 1,784 in 2005).
- Restatement periods were shorter in later years, decreasing from an average of two or more years (2005) to 18 months or less (2012).
- Restatement activity was consistent across industries. The top three industries were Computer & Software (18 percent), Financial, Banking & Insurance (16 percent), and Energy, Mining & Chemicals (14 percent).
Topics: Audit, Banking, Center for Audit Quality "CAQ", Chemicals, Energy, Financial, insurance, Internal Control Reporting, Mining, Restatement, Sarbanes-Oxley Act "SOX", Software, Technology, U.S. Securities and Exchange Commission "SEC"