Reason for restatement
Entities restate their statements due to diverse reasons. The reasons entail alteration of standards, material misstatements or changes in ownership (Federal authorities, 2010). The preferred organization is Poynt Corporation. This corporation holds a sizeable market proportion in the mobile advertising market. Fundamentally, the organization enhances the clientele’s ability to access other people, entities and events that are of significance to them. The assets that this entity holds are advertising platforms on fancy gadgets like iPhone, Blackberry and iPod (Market wire, 2011). The evaluation of such assets and patents is challenging since they are tricky to quantify. Additionally, the digital world is progressing rapidly. Consequently, new discoveries can lead to plummeting of the worth of such assets. Changes in the GAAP standards necessitated restatement in this corporation. GAAP regulations are the rules that govern financial reporting in entities. Subsequently, changes in these regulations may necessitate alterations of records. The alterations in the GAAP regulations deemed it imperative to change the value of Poynt Corporation’s assets. The assets related to contracts that Poynt Corporation has signed. The adjustment of the assets also necessitated alteration of the share value. Notably, restatement occurs where the adjustments are material. The adjustments can either lead to investors making an inappropriate decision or change the profitability of the entity. Accordingly, the adjustments in this entity were material as deemed by the board, accountants and directors. It was crucial for such stakeholder to oversee such an undertaking as they have the necessary expertise (Bragg, 2011).
Management’s responsibility to the investors and stakeholders
Restatement of financial statements generates responsibility. Nonetheless, the responsibility will rely on what necessitated the corrections. Where the restatement emanated from discovery of material mistakes there are individuals that will bear such responsibilities. Evidently, restatement puts into focus financial reporting in the entity. Financial reporting is among the core tasks of the management. Therefore, it is critical to establish whether the errors emanated from accounting malpractices or audit failure. If it is due to accounting malpractices, then the accountant is responsible. Conversely, if restatement emanates from audit failure then the auditor bears the responsibility (Bragg, 2011). The management has a basic object of preparing records that provide a genuine representation of the state of the entity. Accordingly, investors and stakeholders utilize such information to make decision pertaining to the entity. Therefore, the individuals that bear responsibility for errors that necessitated restatement should remedy investors and stakeholders that incur losses. However, for such parties to receive remedy they have to prove that the losses incurred resulted entirely from utilization of such accounts. However, Poynt Corporation will have no liability due to such records due to the disclaimer. The disclaimer clause warns those individuals that utilize records that they will not shoulder financial misfortunes owing to utilization of statements (Palmrose, 2000).
Changes due to the restatement
Evidently, the restatement in Poynt does not emanate from erroneous reporting. However, it culminated from adjustments of auditing standards. Accordingly, the accountants and auditor have no responsibility to bear for the restatement. This means that the internal controls are functioning aptly. The restatement resulted from factors beyond their control. Despite that, it is crucial for the Poynt Corporation to streamline its internal control with the new GAAP regulations. As such, the entity will eliminate any material errors in valuation of assets. Obviously, this entity will require experts that can value their assets precisely. This is because the valuation of such assets has proved technical. Additionally, the entity will need to make relevant disclosures (Bragg, 2011). The management of Poynt Corporation should always elaborate the basis utilized in the estimation of assets and the relevant assumptions. These disclosures will ensure that the records draw the investors’ attention to such valuations. This will reduce any responsibility that may emanate from utilization of the records. The assets’ worth has implications on the shares’ value. The leadership in Poynt Corporation will ensure that the management integrates the adjustments in the GAAP rules. This will prevent any restatement in future. Overall, restatement affects the corporate image of an entity negatively although it seeks to provide the public with accurate data (United States General Accounting Office, 2002).
Impacts of restatement on trustworthiness in the leadership team
Restatement puts into question the capability of management to undertake its responsibility adequately. Therefore, it culminates in reduction of trust. Regardless of the reasons that necessitate restatement, the public view it as failure of management to avail credible records. Additionally, individuals may view it as an attempt to swindle the investors who may have minimal knowledge of what transpires in the entity (Palmrose, 2000). If the misstatement emanates from accounting malpractices, then the management bears the discredit. This can degenerate into suits as parties that suffered losses request for reimbursement. Thus, restatements have considerable implications on the trustworthiness on the management. Similarly, restatement will result in decreased reliance on the statements of such an entity. Nonetheless, while restatement could seem as a failure of the management, it might also denote its endeavour to ensure that the public receives accurate information. Restatement has considerable financial implications. Thus, most entities would seek to elude them by failing to restate their records. This implies that entities that restate their record are bold and ready to encounter any consequences that emanate from errors in their records (Palmrose, 2000).
References
(Palmrose, Z. (2000). Restated financial statements and auditor litigation. Web.
Bragg, S. (2011). Interpretation and application of generally accounting principles. New York, NY: Wiley and sons publication.
Federal authorities. (2010). Code of Federal Regulations, Title 17, commodity and securities exchanges…Washington, MD: Government printing office.
Marketwire. (2011). Poynt sorporation completes restatement of 2010 Financial Statements. Web.
United States General Accounting Office. (2002). Financial statement restatements. Web.