Question

In 2018 the SEC investigated the rounding of earnings per share by public corporations. Why? What was it all about?

Answer 1

SEC launched a probe to determine whether the companies have improperly rounded their EPS up to the next highest cent. A few companies were asked by SEC to provide information about accounting adjustment that could push earnings higher. It came to their attention that the number “4” rarely appears in the tenth place of companies’ reported EPS. For example, if the EPS is coming as $1.4, it would be shown as $1.5, and be rounded up to $2. Wherease, $1.4 should be rounded down to $1. The same can be an indicator of accounting fraud.