The accounting team at Kinetic CPA Group, LLC are experts in the field of complex accounting concerns. We can assist your team in:
- reviewing and assessing allegations
- identifying appropriate accounting and professional standards (e.g. IFRS or GAAP)
- analyzing the accountant's application of those standards
- evaluating the impact of the correct application of accounting standards on financial reporting, and
- remediating the impact by assisting in the restatement of your financial statements, if necessary
Give Kinetic CPA Group, LLC a call today for a confidential consultation.
Fraudulent Financial Reporting Investigations
In complex commercial disputes, economic damage identification and quantification can require expertise in sophisticated financial and accounting concepts. Members of our team have been involved in various investigations and can help you uncover the truth by:
- Determining the methods of fraud and quantifying its effect
- Securing key documents
- Interviewing key individuals
- Reconstructing lost or destroyed financial records
- Performing in-depth financial statement analysis
Contact Kinetic CPA Group, LLC today for a confidential consultation.
Corporate officers, auditors and audit committees all work towards ensuring US publicly traded companies provide accurate corporate financial reports to investors. However, even with all of the different components working diligently to present clear and accurate reports, errors do occur. How the error is rectified depends on the timing and severity of the offense.
What is a restatement of a financial statement?
The Financial Accounting Standards Board (FASB) defines a Restatement ("Big R") as a revision of a previously issued financial statement to correct an error. Restatements are required when it is determined that a previous statement contains "material" inaccuracy. However, FASB offers minimal guidance in defining materiality. Accountants are responsible for determining whether a past error is "material" enough to need a restatement. The Securities and Exchange Commission (SEC) suggests companies and auditors conduct quantitative and qualitative analysis to identify any errors in prior financial statements.
Often, "material" inaccuracies stem from accounting mistakes, noncompliance with generally accepted accounting principles (GAAP) or other frameworks, fraud, misrepresentation or clerical errors.
In what instances are Restatement filed?
A "material" error affecting part or all of a financial statement often triggers a Restatement.
Typically, these errors are a result of innocent mistakes and/or basic misinterpretation. Some leading causes for restatements include:
- Recognition errors – For example, when accounting for leases or reporting compensation expense from backdated stock options.
- Income statement and balance sheet misclassification – For instance, a company may need to shift cash flows between investing, financing and operating on the statement of cash flows.
- Mistakes reporting equity transactions – This includes improper accounting for business combinations and convertible securities.
- Valuation errors related to common stock issuances
- Preferred stock errors
- Complex rules related to acquisitions, investments, revenue recognition and tax accounting
In some cases, the error is alleviated through a Restatement. While innocent sounding, a Restatement can be devastating. Thus, it is important to understand when they are necessary, how it can affect you, and how to avoid the situation altogether.
In addition, companies often issue Restatements when their financial statements are subjected to an elevated degree of scrutiny. For example, Restatements occur when a private company converts from compiled financial statements to audited financial statements or decides to file for an initial public offering (IPO). Other cases of Restatements include when an owner elects to utilize additional internal (or external) accounting expertise, such as a new controller or audit firm.
Let Kinetic CPA Group, LLC help take the burden of sorting through these issues. We have an experienced team with exceptional experience ready to help.