What is an accounting error?
An accounting error is a non-fraudulent discrepancy in financial documentation. The term is used in financial reporting.
Types of accounting errors include:
- Error of omission -- a transaction that is not recorded.
- Error of commission -- a transaction that is calculated incorrectly. One example of an error of commission is subtracting a figure that should have been added.
- Error of principle -- a transaction that is not in accordance with generally accepted accounting principles ( GAAP). One example of an accounting error of principle is an expenditure that is placed in an inappropriate category.
If a company discovers that an accounting error significantly affected a previous report, it usually issues a restatement of the original release.
Learn More About IT:
> Linda Tucci explains 'How the SEC's proposed IFRS will affect your accounting systems.'
> John W. Day provides a guide to identifying and correcting accounting errors.
>A.C. Sondhi & Scott A.Taub co-authored 'Revenue Processes at Risk for Compliance Failures and Restatements.'