Facing a restatement? Here’s why you should consider an external accounting adviser

No public company executive wants to face the pressure and tension of a material restatement of their financial statements. If you find yourself in that position, it’s a situation where you likely don’t want to learn on the job or go it alone. So, one of the first steps to consider is whether you need a skilled, experienced accounting adviser by your side.

Once a restatement is identified, the clock is ticking. It’s important to act quickly and decisively to establish transparency and trust among your stakeholders, including investors, creditors, the board of directors, and employees.

In this high-stress situation, your in-house accounting and reporting team may lack the bandwidth or experience to manage a restatement’s many moving parts. An accounting adviser who has experienced other remediation efforts and guided companies through similar situations can offer knowledge and experience to advise you as you navigate all the various workstreams.

IPOs, SPACs fuel a rise in restatements

Deloitte’s recent article, “Restatements and remediations after an IPO or de-SPAC,” found that the surge in initial public offerings and de-SPAC transactions was matched by a sharp increase in restatements, up 289% in 2021.

Remediation is potentially one of the most complex projects you’ll ever have to manage. From the board to the CEO to the auditors to the operations staff, everyone is worried and pressing for answers. Lawyers, external investigators, and regulators could be involved. Making matters worse, the project can expand as the full implications of the restatement emerge. It often takes time—and experience—to grasp the full extent of the effort required to get to filing your restated financials.

Your company might have much of the expertise it needs to resolve its restatement in-house. Even then, an experienced accounting adviser can make a dramatic difference—marshaling and balancing internal and external resources, lending insights from experience and advising on relations with auditors and regulators. Just as important, your adviser can take a critical look at internal controls mechanisms—people, processes, and technology—to provide recommendations for remediation.

What to consider in an accounting adviser?

Hiring an accounting adviser with an audit background may be pivotal. A professional with an audit background can bring:

• The ability to navigate complex accounting issues. Advice to identify the cause of restatements or material weaknesses and recommend corrective actions.
• Experience in the audit process. Insight into your auditors’ requirements in addressing the restatement or material weaknesses can save you valuable time and effort.
• A mindset that asks important questions so that issues that contributed to the material weakness are aired and resolved.
• A risk-management mindset and skill set to advise as you develop strategies to mitigate risks and enhance controls.
• Deep experience in project management and organization (PMO) as you coordinate and balance the disparate resources internally and externally, so you can streamline the restatement process, reduce disruptions, and work toward timely completion.

What comes after the restatement?

You—and your CEO, board, and employees—will likely want to put the restatement in the past as quickly as possible. Speed is important—but it’s vital that it is not at the expense of complete and accurate information. An outside perspective can reduce the likelihood of a second restatement on the heels of the first.

Once your restatement is complete, you may still be faced with a sizable challenge: bolstering your internal controls. Here, too, an experienced accounting adviser can provide vital advice and recommendations. With a broad skill set from working with a range of companies, an adviser can take a critical look at your people, processes, and technology to find gaps. Your adviser may also be able to provide recommendations as you design new sustainable systems and quality financial reporting.

At Deloitte, we bring to the table our broad experience with restatements, bringing an array of knowledge and insight that your company could leverage to confront the challenges that a restatement brings. For more on this topic, see our article, “Restatements and remediations after an IPO or de-SPAC.”

I hope that you never have to live through a restatement. But if you do, I hope you’ll reach out immediately for an experienced accounting adviser.

?

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional adviser. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

The services described herein are illustrative in nature and are intended to demonstrate our experience and capabilities in these areas; however, due to independence restrictions that may apply to audit clients (including affiliates) of Deloitte & Touche LLP, we may be unable to provide certain services based on individual facts and circumstances.

As used in this document, “Deloitte” means Deloitte & Touche LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of our legal structure. Certain services may not be available to attest clients under the rules and regulations of public accounting.

Copyright ? 2023 Deloitte Development LLC. All rights reserved.