Accounting errors. Is it possible to eliminate them?

In the difficult times of ever deeper crisis and the uncertainty of the future, with those around us constantly reports about the pyramids and financial embezzlement, the reliability of financial information gains an importance.

Every investor, both current and potential, is looking for reliable information about the financial condition of the company. He/She needs a reliable tool that allows him to get objective insight into company?s finance, this tool is the financial statement. With it, you reduce the disproportion between the information for the management board of the company, and information to its external environment. In consequences it provides higher trust in company and in its managing board, what comes next- the market value of the company is increasing.

Unfortunately, showing in reliable way financial information is easy task. Often there are errors, which may be intentional or unintentional. The second result comes from incompetence or lack of knowledge of people who are preparing the financial statements. The most common errors are:

•  incomplete information, particularly in interim financial statements,

•  distortion earnings by overstating revenues and understating costs

•  introduction of asset cost items,

•  Incorrect setting of accounting estimates,

•  incorrect classification of leases.

Errors reduce utility and reliability of financial information. The most common are mainly characterized by:

•  incompleteness of information occurring in interim financial statements, which most applies to:

- Lack of information on important, relevant, but unusual transactions such as the purchase of units, changes in accounting policies, etc.
- Unadjusted accounting policy, which takes account of the specific situation, resulting from the nature of the entity or business,
- Lack of adequate disclosure in the context of going concern;
- Lack of description of the existing risks related to the monitoring of receivables (credit policy) and foreign currency risks and the risk management system,
- Too little detailed tables for material items, such as accruals, provisions, notes with calculations of current and deferred tax.

•  It is a distortion of the financial result associated with the desire to show better financial results than it has done in order to gain personal advantage or advantage for the company itself. The most common way is to shift the costs and revenues between years.

•  placing on the assets of the balance sheet items of expenditure

•  In the current crisis the accounting estimates are major impulse for manipulation,  we  also often meet a problem with underestimated value. These are the most common: an underestimation of write-downs or provisions for warranty costs and services accomplished but not invoiced.

•  Abnormal classification of leases, in practice: the classification of financial leasing as an operating system. The most common reason for its existence is the desire to facilitate the settlement that the operating leases are much simpler.

As committed errors created the need for appropriate expert systems that allow you to see the areas vulnerable to manipulation, will help to calculate the deductions, the creation of reserves and the rapid identification of whether an operating lease should be classified or loss.  One of these kind of expert systems is 24ivalue.com using this program you will save time and gain confidence in the accuracy of the calculations you have made.


 We wish all reliable reports

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