Number of Firms Restating Results Sets Record

The number of companies that restated financial results from previous years because of accounting errors jumped to a record high last year, spurred by the feverish scrutiny of corporate books after the Enron Corp. debacle, a study by a consulting group found.

In 2002, the number of restatements shot up 22% from 2001 to 330, according to a study by Huron Consulting Group released Tuesday.

The restatements come against the backdrop of a crisis of confidence in corporate financial statements after a spate of accounting scandals brought down several companies, including Enron and its accounting firm Arthur Andersen. Among others, Xerox Corp., Household International Inc. and CMS Energy Corp. restated or announced their intention to restate earnings last year.

The number of restatements filed in the five months after the Sarbanes-Oxley corporate reform bill was passed by Congress also were significantly higher than those filed in the first seven months of the year, the study said.

The new law, aimed at cleaning up the crisis in financial reporting and the accounting industry, stiffens the penalties for fudging financial statements, among several other measures.

The study also confirmed investor fears that accounting problems are not confined to small companies with sparse oversight: It found that companies with annual revenue of $100 million or more accounted for 190, or 58%, of all restatements filed during the year.

Revenue recognition problems -- improperly recognizing revenue on transactions -- was the No. 1 cause for restatements in 2002.