Correction of Accounting Errors
Correcting Previously Issued Financial Statements
Accounting errors result from mistakes such as mathematical errors, incorrect application of GAAP, fraud, or oversight. Error corrections differ from estimate revisions because errors involve incorrect accounting rather than updated information.
- Mathematical mistakes.
- Incorrect depreciation calculations.
- Failure to record accrued expenses.
- Misapplication of accounting standards.
- Fraudulent reporting.
Note
Errors should never be corrected by simply recording the adjustment in current-year income.
Summary
Material accounting errors require retrospective correction and restatement of prior financial statements.