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2022 was a small bump in an otherwise long-term trend of declining financial restatements, according to a new report from the Center for Audit Quality.
Public companies filed 402 restatement announcements in 2022, up from the 362 filed in 2021 but down from 858 in 2013.
The study includes both 4.02 and non-4.02 restatements, also known as “Big R” and “little r” restatements. In 2022, 4.02 restatements made up a larger portion of the total restatements than in the previous nine years, at 38%. Big R restatements accounted for one-quarter of restatements overall in 2021, 21% in 2020, and 28% in 2013.
According to the report, “It is too early to tell if the increase in restatements toward the end of the sample period is a true inflection point or simply a brief disruption of the previous downward trend.”
CAQ found that 41% of all restatements cited two or more accounting issues, and restatements contained 1.8 issues, on average.
In 2022, 24% of restatements cited "financial statement presentation issues, roughly in line with the 10-year average of 27%. Cash flow statement issues were cited in 9% of restatements that year, down from a 10-year average of 16%. Other issues cited included income statement misclassification (6% in 2022) and debt/equity misclassification (5%).