Tag: Audit Analytics
What happened with financial restatements in 2021?
Audit Analytics has just posted its 2021 annual review of financial restatements, which this year covered a 21-year period. The review showed a 289% increase in the number of restatements to 1470, the highest level of restatements since 2006. You may have guessed that the increase was attributable to restatements by SPACs. Excluding SPACs, the numbers actually reflected a 10% decrease in the number of restatements year over year. SPACs also account—largely but not entirely—for a large increase in the proportion of reissuance (“Big R”) restatements. Audit Analytics found that 62% of restatements were reissuance restatements, the biggest proportion since 2005. But even excluding SPAC restatements, 24% of 2021 restatements were reissuances, an increase from 2020 of three percentage points.
Audit Analytics reports on cybersecurity disclosure
These days, with our government warning regularly about the likelihood of breaches in cybersecurity, concerns about cyber threats have only multiplied. Introducing the SEC’s new proposal for cybersecurity disclosure in March (see this PubCo post), SEC Corp Fin Director Renee Jones said that, in today’s digitally connected world, cyber threats and incidents pose an ongoing and escalating threat to public companies and their shareholders. In light of the pandemic-driven trend to work from home and, even more seriously, the potential impact of horrific global events, cybersecurity risk is affecting just about all reporting companies, she continued. While threats have increased in number and complexity, Jones said, currently, company disclosure about cybersecurity is not always decision-useful and is often inconsistent, not timely and sometimes hard for investors to locate. What’s more, some material incidents may not be reported at all. Audit Analytics has just posted a new report regarding trends in cybersecurity incident disclosures. The report indicates that, in 2021, there was a 44% increase in the number of breaches disclosed, from 131 in 2020 to 188 in 2021, the most breaches disclosed in a single year since 2011. And, since 2011, the number of cybersecurity incidents disclosed annually has increased nearly 600%. Interestingly, however, in 2021, only 43% of cybersecurity incidents were disclosed in SEC filings, the report said.
What are the latest trends in SOX 404 reporting?
As you probably recall, SOX 404 requires public reporting companies to disclose the effectiveness of their internal control over financial reporting. SOX 404(a) public companies to provide an assessment of ICFR by management; SOX 404(b) requires public companies—other than non-accelerated filers and emerging growth companies—to provide an auditor attestation regarding management’s assessment of the effectiveness of ICFR. A new study by Audit Analytics examining the most recent trends in SOX 404 disclosures over 17 years showed a decline in the number of adverse auditor attestations—auditor attestations indicating ineffective ICFR—and adverse management assessments, while the number of adverse management-only assessments increased. Why that variation? Could it reflect the effect of the recent SEC carve-out from the 404(b) requirement for low-revenue companies?
How did COVID-19 affect financial reporting and financial health?
Audit Analytics has just released a deep dive into the impact of COVID-19 on financial reporting and financial wellbeing. To assess the effect of the pandemic, the report looked at going-concern audit opinions, impairment charges, late filings and changes in the control environment, as well as restatements. Some of the results might be surprising. For example, the pandemic had a significant impact on impairment charges, but the number of going-concern qualifications in audit opinions? Not so much.
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