Corporate Governance

Auditors Explain Restatements

By Fei-Lu Qian

To further assist auditors signing off on corporate financial reports, the Public Company Accounting Oversight Board voted to adopt Auditing Standard No. 6 (AS6), Evaluating Consistency of Financial Statements. With the adoption of AS6, an auditor is now require to provide an explanation in its audit report whether its client?s restatement of its financial results is due to a correction of a misstatement or simply due to a change in accounting rules. Thus, this new rule should help investors to determine whether a restatement is truly a result of a fraud.

?Auditing Standard No. 6 will improve the quality of the auditor?s reporting on items that affect the consistency of financial statements, such as a company?s adoption of a new accounting principle or its correction of a material misstatement,? said Mark Olson, PCAOB chairman. ?Investors should benefit from these improvements.?

Full post as published by PomTalk on January 30, 2008 (boomark / email).