In a classic understatement, programmable-chip-maker Altera (NASDAQ:ALTR) said it would have to restate 10 years of financial statements because it improperly accounted for stock-based compensation costs due to backdating. According to the company, the restatements meant that it likely had a material weakness in its controls over financial reporting. Gee, you think?

In stock option backdating, a company unethically enriches its executives by changing the date at which their stock options were issued, maximizing the increase between their issue price and the stock's current price. It's apparently not illegal to do so, though both the Securities and Exchange Commission and the Justice Department are investigating dozens of companies.

More than 50 companies have announced investigations into possible backdating of their executives' stock options, including Comverse Technology (NASDAQ:CMVT), Brocade Communications (NASDAQ:BRCD), and VitesseSemiconductor (NASDAQ:VTSS). Silicon Valley companies seem to be most under the gun, considering the sizable role stock options played in their compensation practices. However, Home Depot (NYSE:HD) is the largest company thus far to acknowledge that it has an options backdating problem.

The public relations smear splashing across corporate America is prompting many companies to investigate their own stock options granting procedures and publicize the results. They've wisely realized that it's better to air your own dirty laundry than let the SEC or Justice do it for you.

Altera found its options problem through its own internal investigation, and its unprecedented 10 years' worth of restatements shows how insidious and far-reaching the backdating problem is. While Altera says the backdating issue only occurred between 1996 and 2000, the different time periods over which options vest will require the company to rewrite a whole decade's worth of financial statements.

With the 2002 enactment of Sarbanes-Oxley, Congress passed regulations meant to improve corporate transparency, with somewhat mixed results. Prior to Sarbanes-Oxley, executives had up to 45 days to file their Form 4's, which show a change in beneficial ownership of a stock. So when options were granted back then, executives and their boards had plenty of time to fiddle with the dates that would actually show up. After the passage of SOX, companies had only two days to notify the SEC, and that essentially put an end to the issue.

Although Altera says the rewritten financial statements will only involve non-cash charges, it's essentially admitting that the financials it asked investors to rely upon for the past decade were fictional. I like a good story just as much as anyone -- but not from a company that wants my investment dollars.

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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.