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Chapter 3 — Financial Statement Preparation and Disclosure Requirements

3.7 Restatements and Corrections of Accounting Errors

3.7 Restatements and Corrections of Accounting Errors

Financial statement restatements can be expensive and time-consuming. However, the level of effort and cost required to restate financial statements is often dwarfed by the loss of public confidence that can result from such restatements. An entity that is preparing its initial registration statement or another initial public filing for submission to the SEC will benefit from designing a thorough set of processes and internal controls that ensure the completeness and accuracy of its financial statements and from working with its auditors to provide assurance that the financial statements are free from material misstatement. This section discusses the evaluation of potential accounting errors, alternative responses to such errors, and other matters that apply to entities filing with the SEC for the first time.