Restatements. The NY Times reports that the number of restatements was up again in 2004. Although several theories to explain the increase are proposed, I believe the correct one is that auditors don't want to take any chances so are making clients restate items that in the past would have been rolled over into future numbers.

Some of the restatements may simply reflect the fact that auditors are much more conservative and more apt to instruct a client to restate earnings after finding an error that several years ago might have been overlooked or ignored. The criminal prosecution of Enron's auditor, Arthur Andersen, put accounting firms on notice that times had changed.

Additional evidence of increased auditor conservatism was shown in a recent conference paper that provided evidence that since Enron, auditors are more likely to issue going concern opinions to struggling clients than in the pre-Enron period.