INTRODUCTION
Events leading to the breakup of large accounting giants, corporate failures, and regulatory actions are evidence of financial reporting irregularities. Many of these irregularities involved restatement of financial statements due to error. Financial statements are prepared by the management as per the applicable accounting framework and GAAP to meet the expectations of various stakeholders. Schedule III to the Companies Act, 2013 requires companies to disclose the comparative period amounts as well in addition to current period numbers to ensure comparability between the periods presented.
The incidence and extent of restatements in various high-profile companies have created an image that the accounting process has failed more often than it really has. As per the ‘2021 FINANCIAL RESTATEMENTS - A TWENTY-ONE-YEAR REVIEW issued by Audit Analytics1’, the number of restatements filed increased significantly to 1,470, due to Special Purpose Acquisition Companies (SPAC) restatements. Excluding SPAC restatements, there was a 10 per cent year-over-year decrease. As per this study, revenue recognition had been the top issue in each of the past three years. Some of the examples include a change in the method (policy) of revenue recognition from over the period of time to the point of time, restatement originating from a failure to properly interpret sales contracts for rebate, retu
