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Study: Severity of Errors Diminishes With Restatements

Tammy Whitehouse | December 6, 2010

Not only have restatements declined in recent years, but the severity of the mistakes that lead to restatements has diminished as well.

That's the conclusion of a recent report from Audit Analytics, which compared how many times companies had to advise investors that old financial statements couldn't be relied on vs. how many times companies had to adjust financials in a way that didn't undermine investor reliance.

According to the research, 68.7 percent of restatements issued in 2009 involved mistakes that were not serious enough to require Form 8-K disclosure telling companies that the financial statements containing the error could not be relied upon for accurate financial information. By contrast only 46.6 percent of restatements in 2005 could be amended in the same way, without an alert to investors saying the...

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