October 19, 2007
HP-623

Treasury Selects Professor for Competitiveness Study
on Financial Restatements

Washington- The Treasury Department announced today the selection of University of Kansas Professor Susan Scholz to conduct its examination of the impact of and the reasons behind public company financial restatements. Secretary Henry M. Paulson, Jr. discussed the need for a better understanding of this issue when he unveiled the auditing and accounting stage of his capital markets competitiveness initiative in May.

Numerous studies have pointed to a significant increase in the number of financial restatements during the past few years. Many reports attribute the growing number of restatements to increased management and auditor focus on accurate financial reporting due to the mandates in the Sarbanes-Oxley Act and greater financial reporting review and enforcement by financial regulators.

However some studies suggest that while some financial restatements are clearly material, immaterial financial restatements might pose significant and unwarranted challenges to the capital markets.  Immaterial restatements might unnecessarily harm investor confidence by calling into question the credibility of company management, auditors, and the financial reporting system as a whole. 

Professor Scholz will examine the factors triggering public company financial restatements, describe public company financial restatements, analyze the impact of public company financial restatements upon investors and the capital markets, and evaluate the significance of public company financial restatements. The study will focus on restatements from 1997-2006. Treasury intends to make the study's results public by early 2008.

Treasury selected Professor Scholz through the government procurement process. She is an associate professor and Harper Faculty Fellow at the University of Kansas School of Business. She received her doctorate degree in business administration from the University of Southern California.

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