Huron's full report, to be released in February, tracks the leading causes and trends in financial restatements filed with the U. S. Securities and Exchange Commission for the year ending December 31, 2003. The analysis is broken down by company size, industry, and accounting issue and also notes whether the accounting error was initially reported in either a quarterly or an annual financial statement.

"The number of accounting errors identified in 2003, though certainly not a cause for celebration, may indicate that we have put the worst restatement period behind us and can expect to see further improvements in the years ahead," said Joseph J. Floyd, chief operating officer for Huron's Financial and Economic Consulting practice.

"As we have observed in prior years, problems applying accounting rules, human and system errors, and fraudulent behavior are the three primary causes for accounting errors," added Floyd.

Reserves and contingencies may be among the most judgmental accounts in a company's financial statements as they are subject to an estimation process. These restatements, however, do not simply reflect changes in estimates, but rather reflect flawed judgments due to the oversight or misuse of facts, fraud, or a misapplication of Generally Accepted Accounting Principals (GAAP).

Revenue recognition was the second leading cause of restatements in 2003. The 63 revenue recognition related restatements identified in 2003, however, represent a 26 percent decrease from 2002 when revenue recognition restatements reached an all time high.

The study also found that in 2003, the number of restated audited annual financial statements rose to a record high of 206, representing 63 percent of total restatements filed during the year.

The number of 2003 restatements by companies with annual revenues under $100 million rose to 158, or 49 percent of all restatements filed during the year. The percentage of restatements filed by companies with annual revenues greater than $1 billion decreased slightly in 2003, from 22 percent in 2002 to 20 percent in 2003.

"Sarbanes-Oxley and recent catastrophic restatements have resulted in major changes in our financial reporting world," Floyd said. "Increased internal and external scrutiny plus shareholder demands are working to improve the financial reporting process."

In addition, this year Huron Consulting Group's full report will summarize the major events impacting the financial reporting world in 2003, including actions taken by the SEC, Public Company Accounting Oversight Board (PCAOB), Financial Accounting Standards Board (FASB) and major observations regarding the public accounting industry.