TheCorporateCounsel.net

A recent Audit Analytics blog discussed the results of its review of situations in which companies have repeatedly disclosed that their internal control over financial reporting, or ICFR, was ineffective. As this excerpt indicates, repeat negative ICFR assessments happen a lot more than you may have thought:

A repeat adverse disclosure is when a company that filed an adverse ICFR disclosure the prior year, files another for the current year. Over the 19-year period, we found that there were 4,892 companies that had at least one repeat adverse ICFR disclosure. Between 2004 – 2022, 3,636 companies filed between one and four repeat adverse disclosures each. On the other hand, 81 companies filed a repeat adverse disclosure between 13 and 16 times over the period.

The blog says that accounting documentation, policy and/or procedures was cited as a deficiency in 98% of repeated adverse disclosures between 2004 and 2022. Unspecified FASB/GAAP issues were the most common accounting issue, cited in 73% of repeated adverse disclosures. The blog goes on to identify the other commonly cited internal controls and accounting issues cited in repeated adverse disclosures.