Three Most Common Reasons for Restating Financial Statements
I just finished reading an interesting article in the Wall Street Journal on financial reporting.
Did you know that over 650 companies filed financial revisions or restatements last year?
In most cases, it appears that the reasons for the misstatements has more to do with confusion with complex accounting and tax rules than anything else.
I am sure that not many of you are surprised by that conclusion. Adding rules to rules seems to be the norm these days.
Can you guess what the 3 most common financial reporting errors are?
I am sure almost all of you immediately guessed Tax which is correct; however, surprisingly, tax is not the most common error.
How many of you guessed the other two?
The first is Debt and Equity and the second is Cash Flows.
Accounting for Debt and Equity errors are often due to dealing with complicated hedging and derivatives which
can be difficult to understand.
Cash flow errors can be easy to make- (my least favorite area of accounting!).
Taxes – well need I say more? It seems as though the tax code grows more complex on a daily basis!
Just a few reasons why continuing professional education remains so important. When you have a chance check out our courses on cash flow, hedging and derivatives and our tax section which is rapidly growing.