Financial Restatement Paper

Financial Statement Restatement Paper

Accounting ACC/537

June 20, 2011

Jackie Blankenship

Financial Statement Restatement Paper

Companies of all sizes experience financial reporting errors. According to the Government Accounting Office (GAO), financial restatements increased 178% over a six-year period, which when considered in aggregate equals about 10% of the publically-listed companies on the New York Stock Exchange (Zhang & Wierseman, 2009). This is despite the government’s enactment of the Sarbanes-Oxley Act in 2002, which requires a company’s annual report to contain a report on internal control as well as an assessment of the effectiveness of the company’s financial reporting internal control procedures (The US Sarbanes-Oxley Act, 2009). Sarbanes-Oxley also requires an independent auditor to attest to the internal controls over financial reporting and that the Chief Executive Officer and the Chief Financial Officer provide oversight over the company’s financial reporting and certify the statements to be void of untrue or misleading information (The US Sarbanes-Oxley Act, 2009),

Restatements occur when a company discovers mathematical errors or that financial statements are not consistent with Generally Accepted Accounting Principles (Kieso, Weygandt, & Warfield, 2007). Common restatements include changes to expenses, income, assets, equity (including stock options), taxes, and inventory (Kieso, et al., 2007). When a company publishes a restatement, both the company and shareholders are affected, as in the example of Office Depot, who issued a restatement of the company’s 2010 financial statements (Office Depot Announces, 2011).

Office Depot, Inc. is a distributor of office products and services. It is a domestic and global supplier. In 1986, the company was incorporated. It opened its first store in Fort Lauderdale, Florida.

In fiscal year 2010, they sold “$11.6 billion of products and services to consumers and businesses...