Earning's Restatements

Earnings Restatements

Caution should be placed with companies which restate earnings. Questions need to be asked like: - Why did they restate earnings? What are the consequences of the restatements? Famous financial disasters like Enron, WorldCom and Dynegy all had earnings restatements before they went bankrupt. It is important therefore to make sure that the company that one chooses to invest in hasn’t restated earnings in the past few years. Research has been done to show that companies that have independent audit committees are least likely to restate earnings