Accounting fraud investigations have long been a mainstay of the SEC’s enforcement program. In the aftermath of the financial crisis, however, statistics show that the SEC’s focus on accounting fraud took a back seat to cases growing out of the crisis. In FY2012, the SEC opened 124 financial fraud/issuer disclosure investigations as compared to 304 in FY2006 and 228 in FY2007. The agency filed just 79 financial fraud/issuer disclosure actions in FY2012 compared to 219 in FY 2007.1 Perhaps as a consequence of this diminished focus, accounting restatements also declined in this same period. Across all public companies, restatements fell from a peak of 1,771 in 2006 to 768 in 2012.2

Recent statements by SEC officials, however, suggest the pendulum may swing back to a renewed focus on accounting and disclosure fraud. In January 2014, SEC Chair Mary Jo White said that financial reporting fraud would be a priority going forward, including investigations of senior executives for possible misconduct.3 In a September 2013 speech to the American Law Institute, SEC Enforcement Director Andrew Ceresney expressed “doubts about whether we have experienced such a drop in actual fraud in financial reporting as may be indicated by the numbers of investigations and cases we have filed.”4 Ceresney underscored that incentives to manipulate financial statements are still present, and that in 2012, the SEC Whistleblower Program received more tips alleging financial reporting misconduct than it received in any other category.5

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