Over recent weeks, there have been a few threads in Any Answers asking for advice on correcting errors, explains Steve Collings.
The typical scenarios entail firms taking on new clients and discovering errors that have been made in the client’s accounts. Advice normally entails liaising with the previous firm to ascertain the reasons why certain accounting treatments have taken place through to re-creating the prior year’s financial statements and prior-period adjustments.
This article will take a look at the various ways in which errors might occur within a set of financial statements, together with advice on the best ways in which to correct such errors.
The term ‘error’ is taken to mean an unintentional mistake. FRS 3 Reporting Financial Performance also has the concept of ‘fundamental error’. Fundamental errors are defined at paragraph 63 to FRS 3 and are ‘those that are of such significance as to destroy the true and fair view and hence the validity of financial statements.’