‘Stealth’ Restatements: An Issue Requiring Attention

Kevin Hee, PhD, and Leon Chan, PhD

With the current instability in capital markets, both investors and regulators have emphasized the need for increased disclosure and transparency by corporations. Market participants use past and current financial statement information to predict future financial performance, and these predictions are then incorporated into their investment decisions. Therefore, the more timely and transparent a company is in disclosing events that affect the reliability of financial information from past and current years, the more efficiently financial statement users can update their expectations and make decisions with the new information.