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.'