The Changing Nature and Consequences of Public Company Financial Restatements analyzed financial restatements in the years before and after the Sarbanes-Oxley Act was enacted, when the number of restatements grew from 90 in 1997 to 1,577 in 2006.
Major findings of the study, authored by Susan Scholz, an accounting professor at the University of Kansas, included:
Fraud was a factor in only 2% of 2006 restatements, down from 29% in 1997.
Revenue-related restatements decreased from 41% in 1997 to 11% in 2006.
Companies that issue restatements are typically unprofitable, with more than half reporting a net loss in the year prior to announcing the restatement.
The proportion of restatements for annual, audited financial statements (rather than quarterly, unaudited ones) increased from 50% to 70%.
The complete study is available at www.treasury.gov
Source: Treasury Department, www.treas.gov/press/releases/reports/FinancialRestatements_1997_2006.pdf .