Financial Accounting Blog

Wednesday, June 09, 2004

Proper Disclosure. The SEC used the settlement with Warnaco Group to send a message to all companies. reports that the SEC settled charges against Warnaco and its auditors PwC stemming from the company's misleading disclosures concerning the clothing company's 1998 financial results and an inventory overstatement of $145 million. In other words, they neglected to tell shareholders that the overstatement would result in a significant restatement of the financials for the prior three years.

The SEC stated that the executive officers and auditors should have known better:
"With the action taken today, the commission has reiterated to issuers, their management, and audit firms that simply 'getting the numbers right' is not enough. An issuers filings cannot give misleading reasons for its financial results and must disclose material information to investors," said Antonia Chion, an associate director of the commission's division of enforcement.