Why ask why? To nobody's surprise, the increase in restatements and the need for proper internal controls was highlighted as an outcome of the 2023 Proxy Season reporting. This is clearly not a fun time to be the audit committee chair for these impacted companies, let alone the CFO and accounting team who are going through the cost, personal toll, and time to repair these issues.
The usual suspects of revenue recognition, lease accounting, and equity accounting are leading contributors to restatements for IPO / SPAC startups. What is becoming more pervasive and requiring far more investment is upgrading internal controls over financial reporting. Never leave home without your internal audit roadmap and do raise the topic during audit committee meetings. The need for speed-to-market reporting is exciting until it is not. Many lessons have been learned over the years when it comes to bad accounting, failed audits, and resultant broken dreams.
As we head into the latter part of this year, expect more SEC scrutiny and oversight from PCAOB as the IPOs and SPACs mature. Will the business plans pan out and did the funding and accounting keep up? More to follow...
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