Financial Statement Restatement Paper

Financial Statement Restatement Paper

ACC/537 Financial Accounting

September 27, 2010

Steven Hall

Financial Statement Restatement Paper

Carter’s Inc. announced on November 10, 2009 that its Audit Committee and outside counsel reviewed it customer margin support provided by the Company and an investigation into undisclosed margin support commitments and related matters. As a result Carter’s Inc. announced that previously issued consolidated financial statements should no longer be relied upon.

Management initially began a review of margin support arrangements from one individual wholesale customer once they became aware of a disputed amount of margin support with the customer. This review resulted in revealing and issue with the identification of recognizing customer accommodations with respect to the initial customer. Once this investigation was complete by management the Audit Committee and outside counsel undertook the review and investigation. They also used forensic accountants which resulted in the conclusion that the wholesale customer reported various customer accommodations in incorrect fiscal periods.

This investigation also uncovered irregularities with members of the sales organization which was not disclosing accommodations arrangements with customers of the Company’s finance organization. They were providing inaccurate documentation and explanations regarding accommodations to the finance organization. No of this information was communicated to the Company’s independent public accounting firm.

The effect of this error was an overstatement of net sales and net income in certain periods as well as an understatement of net sales and net income in other periods. This was limited mainly to the initial customer, however there were other wholesale customers which revealed flaws as well.

They realized that there were control issues one being control over the timing of the recording of customer accommodations was improperly...