What was really behind all of the financial restatements last year? What kinds of trends can be seen in the causes of these financial restatements? The answers to these and other questions regarding public company financials can be gleaned from Chicago-based Huron Consulting Group's Analysis of Restatement Matters: Rules, Errors, Ethics, For the Five Years Ended December 31, 2002.

The purpose of the analysis was to identify the common attributes of the financial restatements of public companies including industry commonalities, company size, and the underlying cause of the restatement.

The study uncovered some key points, including:

• Accounting restatements in public companies were up 22% in 2002 over 2001.

• The primary causes of these restatements were problems applying accounting rules, human and system errors, and fraudulent behavior.

• Industries that dominate the restatement phenomenon include manufacturing, software, finance, insurance and real estate industries.

• Revenue recognition is the leading cause of restatements among most industries.

• Restatements per 1000 public registrants have risen from 21 per thousand in 1999 to 36 per thousand in 2002.

• Larger companies (over $1 billion in sales) saw the largest percentage increase in restatements from 2001 to 2002.

The study also points to two significant developments in 2002 that acted as a catalyst for financial restatements - the passage of the Sarbanes-Oxley Act and the demise of Arthur Andersen.

The Executive Summary of the study is available for free from the Huron Consulting Group's Web site.