The “financials” is the common term for how well the company is doing.
The “financial statement” is the cold hard fact of the bank account and the internal and external accounts.
If management says they have 50 trillion customers, that doesn't show in their SOX stuff. It might show in their annual statement, and investors could sue over that. But it is not SOX.
SOX financial statement is around IT and financial controls to assure the numbers on the quarterly and annual statements are accurate. Those numbers are financial realities that are often verifiable from bank account information and such. 50 trillion customers, as a lie, does not affect the $10,000,000 in the bank account. It is the $10,000,000 that gets listed, along with other payables and receivables and such.
Accounting departments and their software do a great job of recording and preparing these numbers. Auditors spot check these amounts and the things that feed into them. IT controls prove no one inappropriate could fudge them.
I intimately know SOX work.
Yes, its about the accuracy. My point is that its not accurate if their revenues are overstated....which they are if they’ve overstated their users. In that case they have a significant liability they are not accounting for.
The advertising companies who paid them based on an inflated customer count will be owed refunds. They will sue for those if the company doesn’t cough up - and they will win.
Its not just verifying the amount the company says is in its bank account. There is more to it than that.
You say the IT controls prove no one could fudge them. Correct. If they have a lot more bots than they are reporting, that is a failure of their IT controls - and obviously indicates a major control weakness.
I did audit work for Wells Fargo which had employees inappropriately charging customers fees and opening accounts for them in order to meet their own performance numbers. This overstated Wells’ revenue.....yes even though the accounts were opened and the fees charged and collected. Its not that Wells did not have the money. They did. Its that they engaged in fraudulent activity which flattered their financials. They had to disgorge that money and got hit with some severe added sanctions.
Lemme put it this way, if I were auditing Twitter and found they had overstated their customer count and thus had overcharged their customers, I would not sign my name to any SOX or Audit report that did not list that as a finding.