{"id":1610,"date":"2022-01-06T16:22:17","date_gmt":"2022-01-06T15:22:17","guid":{"rendered":"https:\/\/eaa-online.org\/arc\/blog\/blog\/financial-restatements-uk\/"},"modified":"2022-10-16T21:19:01","modified_gmt":"2022-10-16T19:19:01","slug":"financial-restatements-uk","status":"publish","type":"post","link":"https:\/\/eaa-online.org\/arc\/blog\/2022\/01\/06\/financial-restatements-uk\/","title":{"rendered":"Financial Restatements in the UK"},"content":{"rendered":"<p style=\"border: 0px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 15px; margin: 0px 0px 1.625em; outline: 0px; padding: 0px; vertical-align: baseline; color: #373737;\"><span style=\"font-size: 12px;\">This analysis was originally posted by <a href=\"https:\/\/www.auditanalytics.com?utm_source=eaa&amp;utm_medium=blog&amp;utm_campaign=2022.01.06\">Audit Analytics<\/a>.<\/span><\/p>\n<p style=\"border: 0px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 15px; margin: 0px 0px 1.625em; outline: 0px; padding: 0px; vertical-align: baseline; color: #373737;\">We will finish our review of accounting quality by looking at\u00a0<a style=\"border: 0px; font-family: inherit; font-style: inherit; font-weight: bold; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline; color: #436671; text-decoration-line: none;\" href=\"https:\/\/www.auditanalytics.com\/products\/europe\/financial-restatements?utm_source=website&amp;utm_medium=blog&amp;utm_campaign=2022.01.04\" target=\"_blank\" rel=\"noreferrer noopener\">financial restatements<\/a>\u00a0in the UK. Over the past few years, the number of companies listed on the London Stock Exchange that have restated their financials has grown. This analysis includes companies listed on both the Main Market and the AIM Market.<\/p>\n<h2 id=\"h-trends-in-uk-financial-restatements-2018-2020\" style=\"border: 0px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 15px; margin: 0px 0px 0.8125em; outline: 0px; padding: 0px; vertical-align: baseline; clear: both; color: #000000;\">Trends in UK Financial Restatements: 2018 \u2013 2020<\/h2>\n<div class=\"wp-block-image\" style=\"border: 0px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 15px; margin: 0px 0px 1em; outline: 0px; padding: 0px; vertical-align: baseline; color: #373737;\">\n<figure class=\"aligncenter size-full is-resized\" style=\"display: table; clear: both; margin: 0px auto;\"><a style=\"border: 0px; font-family: inherit; font-style: inherit; font-weight: bold; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline; color: #436671; text-decoration-line: none;\" href=\"https:\/\/eaa-online.org\/app\/uploads\/sites\/3\/2022\/01\/https__blog.auditanalytics.com_wp-content_uploads_2022_01_image-3.png\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" loading=\"lazy\" class=\" size-full wp-image-1607\" style=\"border: none; max-width: 100%; height: auto; padding: 6px; border-radius: inherit;\" src=\"https:\/\/eaa-online.org\/app\/uploads\/sites\/3\/2022\/01\/https__blog.auditanalytics.com_wp-content_uploads_2022_01_image-3.png\" alt=\"\" width=\"368\" height=\"272\" \/><\/a><\/figure>\n<\/div>\n<p style=\"border: 0px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 15px; margin: 0px 0px 1.625em; outline: 0px; padding: 0px; vertical-align: baseline; color: #373737;\">In 2018, there were 73 restatements disclosed. Then, by 2020, the number rose to 133. All in all, this represented an 82% increase in restatements over two years.<\/p>\n<p style=\"border: 0px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 15px; margin: 0px 0px 1.625em; outline: 0px; padding: 0px; vertical-align: baseline; color: #373737;\">However, the 73 restatements in 2018 represented just 4.1% of companies that issued an annual report. This rose to 5.6% in 2019 and 7.6% in 2020.<\/p>\n<p style=\"border: 0px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 15px; margin: 0px 0px 1.625em; outline: 0px; padding: 0px; vertical-align: baseline; color: #373737;\">Financial reporting quality and audit quality have been a main focus in the UK. A succession of\u00a0<a style=\"border: 0px; font-family: inherit; font-style: inherit; font-weight: bold; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline; color: #436671; text-decoration-line: none;\" href=\"https:\/\/eaa-online.org\/app\/uploads\/sites\/3\/2022\/01\/https__assets.publishing.service.gov_.uk_government_uploads_system_uploads_attachment_data_file_970673_restoring-trust-in-audit-and-corporate-governance-command-paper.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">reviews and proposals<\/a>\u00a0have been made over the past few years in response to major accounting scandals.<\/p>\n<p style=\"border: 0px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 15px; margin: 0px 0px 1.625em; outline: 0px; padding: 0px; vertical-align: baseline; color: #373737;\">BHS became insolvent in 2016 following a clean audit opinion. Additionally, Carillion became insolvent in 2018 under similar circumstances. Patisserie Valerie went into administration in 2019. It was discovered that Patisserie Valeries\u2019 financials were materially misstated.<\/p>\n<p style=\"border: 0px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 15px; margin: 0px 0px 1.625em; outline: 0px; padding: 0px; vertical-align: baseline; color: #373737;\">Proposals include strengthening monitoring and reporting on internal controls, widening the scope of information assessed by the statutory auditor, and establishing a new regulator with greater authority, among other reforms.<\/p>\n<h2 id=\"h-top-restatement-issues-in-2020\" style=\"border: 0px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 15px; margin: 0px 0px 0.8125em; outline: 0px; padding: 0px; vertical-align: baseline; clear: both; color: #000000;\">Top Restatement Issues in 2020<\/h2>\n<div class=\"wp-block-image\" style=\"border: 0px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 15px; margin: 0px 0px 1em; outline: 0px; padding: 0px; vertical-align: baseline; color: #373737;\">\n<figure class=\"aligncenter size-full is-resized\" style=\"display: table; clear: both; margin: 0px auto;\"><a style=\"border: 0px; font-family: inherit; font-style: inherit; font-weight: bold; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline; color: #436671; text-decoration-line: none;\" href=\"https:\/\/blog.auditanalytics.com\/wp-content\/uploads\/2022\/01\/image-1.png\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" loading=\"lazy\" class=\"wp-image-39374\" style=\"border: none; max-width: 100%; height: auto; padding: 6px; border-radius: inherit;\" src=\"https:\/\/blog.auditanalytics.com\/wp-content\/uploads\/2022\/01\/image-1.png\" alt=\"Firstly, Liabilities and accruals had a 24.1% frequency. Secondly, revenue recognition had a 14.3% frequency. Thirdly, leases had a 12.0% frequency. Fourthly, inventory and debt and equity securities had an 11.3% frequency Fifthly, intercompany issues had a 10.5% frequency. Sixthly, Tax matters, mergers and acquisitions, and asset classification had an 8.3% frequency. Finally, Cash flow classification had a 7.5% frequency. \" width=\"301\" height=\"266\" \/><\/a><\/figure>\n<\/div>\n<p style=\"border: 0px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 15px; margin: 0px 0px 1.625em; outline: 0px; padding: 0px; vertical-align: baseline; color: #373737;\">The most common accounting issue cited in 2020 was liabilities and accruals. This is in line with Canada. The second most common issue was revenue recognition, often among the most cited in the US. And leases were the third most common issue. Leases have seen a large increase in citations following the implementation of the new lease standard (IFRS 16) in 2019.<\/p>\n<p style=\"border: 0px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 15px; margin: 0px 0px 1.625em; outline: 0px; padding: 0px; vertical-align: baseline; color: #373737;\">The sudden rise in UK restatements could be in response to the UK\u2019s focus on audit and reporting quality. The circumstances are similar to the rise in US restatements following the implementation of the Sarbanes-Oxley Act of 2002. UK restatements in 2021 have outpaced 2020. So, we should expect to see a significant increase in 2021.<\/p>\n<hr class=\"wp-block-separator\" style=\"background-color: #cccccc; border: 0px; height: 1px; margin-bottom: 1.625em; margin-left: auto; margin-right: auto; opacity: 0.4; max-width: 100px; width: 100px; color: #373737; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 15px;\" \/>\n<p class=\"has-text-align-center has-small-font-size\" style=\"border: 0px; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 0.8125em; margin: 0px 0px 1.625em; outline: 0px; padding: 0px; vertical-align: baseline; text-align: center; color: #373737;\"><span class=\"has-inline-color\" style=\"border: 0px; font-family: inherit; font-size: 12.1875px; font-style: inherit; font-weight: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline; color: #ff9137;\">Interested in our content? 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We will finish our review of accounting quality by looking at\u00a0financial restatements\u00a0in the UK. Over the past few years, the number of companies listed on the London Stock Exchange that have restated their financials has grown. This analysis includes companies listed on both the Main Market and [&hellip;]<\/p>\n","protected":false},"author":2624,"featured_media":1611,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0},"categories":[106],"tags":[2],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.12 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Financial Restatements in the UK - ARC<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/eaa-online.org\/arc\/blog\/2022\/01\/06\/financial-restatements-uk\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Financial Restatements in the UK - ARC\" \/>\n<meta property=\"og:description\" content=\"This analysis was originally posted by Audit Analytics. 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