If you pay attention to the Business section of the newspaper, then you're no doubt aware of how many public companies have been restating their earnings as of late. You can thank the
Sarbanes-Oxley Act of 2002 for that, which was passed in the wake of accounting scandals at such companies as Enron, WorldCom and Tyco. General Motors has
restated its earnings in the recent past, and in its annual 10-K report of results for 2006 revealed that its ability to effectively and accurately report its finances is inadequate.
This might sound like a shocker, that a company doesn't have the resources to accurately report its numbers to shareholders and the public, but Sarbanes-Oxley changed the accounting game in a big way and major corporations are still trying to catch up to its requirements. GM has vowed to address the problem by hiring six new accounting officers and restructuring its accounting and tax departments. Throwing bodies at the problem is really the only solution, as it's a practical impossibility in many cases for a company as large as GM to keep track of every single penny on its balance sheet. Nevertheless, it's required to at least try and that's what it's doing. Don't expect accounting errors to go away overnight, however. As long as the automaker is forthcoming about errors and moves to correct them quickly, however, these snafus aren't likely to affect its stock price or image with investors.
[Source: Money.cnn.com]
