Financial Reporting


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Amid ongoing revelations of falsified corporate financial statements, the SEC moved to buttress investor confidence in companies’ reported results. In late June the commission issued order no. 4-460 ( www.sec.gov/news/press/2002-96.htm ), which requires the CEOs and CFOs of 947 publicly traded companies with $1.2 billion or more in annual revenue to certify under oath that their most recent annual reports and any subsequent updates or amendments are accurate and complete. These retrospective statements are due to the SEC with the first annual or quarterly report a company files on or after August 14. Any CEO or CFO who files a false certification faces personal liability with potential civil and criminal penalties.

The SEC took this step without waiting for the end (August 26) of an announced comment period for rules it proposed earlier in June. Those provisions would require CEOs and CFOs of all publicly traded companies to certify the accuracy and completeness of quarterly and annual reports they make after the rules become final. (See News Digest, JofA, Aug.02, page 17, www.aicpa.org/pubs/jofa/aug2002/news1.htm.)

A commission spokesman said: “Many executives are good corporate citizens but have been tarred with the brush of scandal. The SEC is offering CEOs and CFOs an opportunity to assure the public that they stand by the numbers they’ve given and have left out nothing important. Those not able to make such a statement have to explain why. If there are more restatements coming, it’s better that investors know about them as soon as possible.”

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QUIZ

8 sentences to help you master subject-verb agreement

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