- Don’t underestimate the work involved in a financial statement.
The entire restatement process, which is likely to take up several weeks, has to occur at the same time everyone is trying to do their day job and keeping the business running. Depending on the complexity of the financial restatement, some companies need to also bring in extra help to keep the day-to-day accounting responsibilities covered.
- Determine whether the error is material or immaterial.
Finance and accounting experts can help to determine, from both a quantitative and qualitative standpoint, whether the error is material, and thus necessary to move forward with a restatement of the financial statements.
- Get at the root cause of why and how the error occurred.
Was the error intentional or an honest mistake? Can it be traced to just one transaction, or was it a pervasive problem? The more complex and pervasive, the more work that will need to be done as the company retraces past missteps.
- Treat the financial restatement like a project.
A dedicated team and a plan will keep the process on track. Specialized resources, such as experts with technical accounting skills, may be needed along the way.
- Always keep the auditors in mind.
Your external auditors will be on high alert as they review the financial restatement. Knowing this ahead of time, the company may want to rely on an external audit liaison to respond to any inquiries and ensure that documentation is sound.
- Evaluate internal controls.
A material weakness in one of more controls is likely to be revealed during the financial restatement process.
- Issue the financial restatement.
A footnote to the restated interim and annual financial statements will need to acknowledge the error correction and the story behind it. The expertise you’ve brought in can help to ensure that this footnote is properly worded and that the company is prepared to address any comments or questions from the SEC afterward.