Roots of Financial Restatements. (CEO Watch).

Roots of Financial Restatements

The number of companies forced to restate their earnings rose 233
percent between 1997 and 2001. Of the approximately 990 restatements
filed over the past five years, most were in the manufacturing industry,
which accounted for 25 percent of all filings. The software industry had
the second-greatest number, with 16 percent.

Accounting Issues                          Number of Restatements
                                  1997      1998      1999      2000

Revenue Recognition                30        40        33        69
Reserves/Accruals/Contingencies    16        22        21        41
Acquisition Accounting              8        20        26        29
(other than IPR&D)
Equity                              8        17        14        16
Capitalization/Expense of Assets   12        10        15        20
Other                               5         9        18        16
Inventory                           4        14        15        18
Convertible Securities             15        10        11        11
In-Process Research and            --         2        45         2
 Development (IPR&D)
Impairment of Assets                3         5         9         4
Taxes                               6         3         6         7
Gain/Loss                           3         7         4         7
Investments/Derivatives             1         3         3         5
Equity Method/Consolidation         5         3         1         9
Discontinued Operations             1         3         6         3
Restructuring                       3         4         7         1

                                  120       172       234       258

Accounting Issues                     Number of Restatements
                                  2001      TOTAL     TOTAL%

Revenue Recognition                48        220       20.2%
Reserves/Accruals/Contingencies    37        137       12.6%
Acquisition Accounting             25        108        9.9%
(other than IPR&D)
Equity                             52        107        9.8%
Capitalization/Expense of Assets   26         83        7.6%
Other                              26         74        6.8%
Inventory                           9         60        5.5%
Convertible Securities              6         53        4.9%
In-Process Research and             1         50        4.6%
 Development (IPR&D)
Impairment of Assets               16         37        3.4%
Taxes                              13         35        3.2%
Gain/Loss                          13         34        3.1%
Investments/Derivatives            21         33        3.0%
Equity Method/Consolidation         7         25        2.3%
Discontinued Operations             5         18        1.7%
Restructuring                       -         15        1.4%

                                  305       1089        100%

Source: Huron Consulting Group, 2002.

Note: Some restatements are listed in more than one accounting category.
The total number of restatements in each year, minus duplications, is:
116 in 1997, 158 in 1998, 216 in 1999, 233 in 2000 and 270 in 2001.
Huron has prepared industry-specific reports boards can use to educate
themselves about common pitfalls in their sector.