January 20 2005 – From the New York Times – LAWFUEL – The Law News Network
Restatements Are at a High, And Lawsuits Are Rising
“The number of restatements by publicly held companies surged to a high in 2004, according to results of a study of regulatory filings by the Huron Consulting Group. . . .
“Some of the surge was a result of companies’ efforts to comply with Section 404 of the Sarbanes-Oxley Act, the corporate governance legislation passed in the wake of revelations of corporate fraud in 2002 . . . [that] requires that companies have their outside auditors review their internal controls — the processes the companies use to record financial transactions and report their results. . . .
“But Section 404 would not lead directly to a restatement, said John T. Bostelman, a partner at the law firm of SULLIVAN & CROMWELL and author of a reference work on the law. A company could receive a clean audit even if its internal controls were found wanting, he said. ‘I actually would be surprised if restatements were being driven by the internal control requirements.’ . . .”