Corporate Financial Restatements From 1995 Through 2020

Abstract

This study investigates corporate financial restatements in the United States from the pre-SOXs period (1995) to the pandemic period (2020) and finds issues of interest to policy makers, auditors, and corporate management. In the early years of the study, fewer than 50 restatements are of record. The 2005 year began a period of increasing filings due to the Sarbanes-Oxley Act with the annual restatements reaching almost 2,000 that slowly declines to only several hundred in 2020. A major portion of the restatements result from interpretation and application of Generally Accepted Accounting Principles (GAAP) accounting rules by publicly owned firms engaged in mechanical, transportation, finance, and service activities. Although the number of restatements decline, the justification for the restatements remain the result of inappropriate recognition or incorrect interpretation of new accounting guidance. Fraud and clerical issues continue to be an insignificant cause for a restatement.