Cautious Times Loom for Public Companies

By now, it's old news that last week, MicroStrategy had to adjust its financial statements to conform to SEC guidelines on reporting revenue in the software industry. This is called a "restatement," and the measure effectively sent the company's stock tumbling over the news that it has not made as much money as previously reported.

Experts and analysts have focused on how this one incident affects the rest of the software industry. Particularly of interest to the accounting profession is how auditors can take a proactive, rather than reactive, role in helping clients and customers better conform and understand the SEC's regulations.

Already, Bear Sterns reports that 32 publicly traded companies changed revenue recognition policies in a reaction to what happened to MicroStrategy. Experts warn that this is just the tip of the iceberg as more and more companies may adjust their statements in accordance with regulations.

So where does the CPA fit in? The profession should realize that investors will be cautious as companies sort through statements and also pay attention to previously recognized revenues in upcoming statements.

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