From the course: Accounting Foundations: Internal Controls
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Errors in the reporting process
From the course: Accounting Foundations: Internal Controls
Errors in the reporting process
- Outright financial fraud is rare because the majority of business managers are honest. However, financial statement problems can still arise from unintentional mistakes. Let's call these unintentional mistakes errors. Errors can occur anywhere in the accounting cycle. Some of the ways to make unintentional accounting mistakes are recording wrong amounts or wrong accounts, double counting, or not counting at all. For example, transactions can be recorded at the wrong amount. A rent payment for $900 might be mistakenly entered into the accounting system as $90. In the old days of manual accounting systems one very common error was the transposition of digits. So the amount of $729 would be mistakenly recorded as $792 with the nine and the two reversed. These transposition errors can still occur whenever human beings input data into a computerized accounting system. Another potential error is that a transaction might not be…
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