Nature and Impact of Restatement and Underlying Accounting Issues

Accounting Research
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Nature of the restatement and the underlying accounting issues
The company restated the financial statements from 2006 to the first quarter of 2009 with regards to four businesses that the organization had acquired. There were non cash charges that were related to how payments for the acquired businesses were redistributed to Huron as well as the sellers of certain aspects of the acquired businesses. In accounting for the acquisition related payments, the organization failed to adequately disclose information about earn out payments made to the executives of the four acquired companies. As such, this was an earnings misstatement as the redistributions were related to sales proceedings. The employees did receive payment, and it ought to have been recorded as compensation. In any case, the employees of the acquired firm who received payments were assumed to still be employees of Huron Consulting, their performance was also be assessed, while there was no other purpose for the payment other than compensation.
The organization restated all the financial statements for the years affected in 2009, given that the presented information did not present a true and fair view of the financial operations. As such, investors who relied on the financial statements were likely to be misled by assuming that Huron was more profitable that it actually was. Under the SEC Act of 1934 mostly section 13 (a) and 13 (b) as well as provisions of the Exchange Act and Rules the management violated the provisions of the Act and failed to focus on the internal controls. The underlying issues were only presented from 2006 to 2009, as the organization sought to retain some of the former employees of the four acquired organizations. Even though, Huron had grown rapidly prior to the statement in the early 2000’s, the acquisitions were judged to have been properly recorded.
In looking at the misstatements, the SEC typically focuses on whether the disclosure related to the misstatement affect tithe control and procedures for the affected financial statements. The aim is to understand the effect of disclosure as well as the effectiveness of controls and procedures. Even though, the management did state that they did not believe that there were improper accounting practices, there was still need to disclose the reason as to why the organization believed that the misstatement occurred. In any case, this gave Huron the opportunity to look into the company’s internal control deficiencies. Under SAB 108, companies are allowed to qu...