The Securities and Exchange Commission’s new rules require company executives to personally certify financial statements. The personal liability now attached to those signatures has caused many companies to spend additional time and money scrutinizing their earnings statements.
Of the 695 companies required to certify financial statements by August 14, all but 20 handed down their signatures on time. While a handful of companies restated past earnings before certifying financials, the vast majority of firms signed off on their earnings statements without making a single adjustment. To many observers, this result added weight to the argument that recent corporate wrongdoing has been the fault of a few rotten apples.
The SEC’s August deadline is the first in a series initiated by the agency to boost investor confidence. It applied to publicly traded companies that earn $1.2 billion or more annually and report earnings on a calendar year. The next deadline comes in late December for companies with comparable earnings but different fiscal years.
If this no-restatement trend continues, shareholder trust can be restored and the stock market may revive.