Financial Restatements Increase in First Half

The number of companies restating financial results because of accounting errors rose 18% in the first half of 2003, according to a new study.

Restatements filed with the Securities and Exchange Commission climbed to 158 in the six months ended June 30, from 134 a year earlier, Chicago-based Huron Consulting Group said.

Financial restatements increased after the passage a year ago of the Sarbanes-Oxley corporate reform law, which forced executives to sign off on the accuracy of results. In the second half of 2002, 196 companies filed with the SEC to correct earlier accounting errors, the most in five years.

Companies announcing earnings restatements this year include Tyco International Ltd., Gateway Inc., Newmont Mining Corp., Halliburton Co. and Network Associates Inc.

The main reasons for this year’s restatements, Huron said, are the application of proper accounting rules, human or system errors and fraud.

The leading accounting reason for the restatements was revenue recognition, in which a company improperly recognizes revenue from transactions, Huron said.

Restatements have also surged because of the demise last year of accounting firm Arthur Andersen, which prompted 1,300 U.S. companies to hire new auditors. New auditors at companies such as Freddie Mac have challenged Andersen’s accounting and forced previous results to be restated.

From Bloomberg News