Consideration of Accounting Errors and Fraud In Financial Reporting

The financial health and stability of a company. One of the main purposes of financial reporting is to provide shareholders and investors with accurate information, so they can make adequate decisions. Therefore, it is vital to accurately report financial information. Even the slightest error that may seem immaterial can have a large impact on important financial ratios. Firms should report the corrections to errors as prior period adjustments including that changes to previous period financial statements were needed. It is vital that the total values of assets and liabilities from the prior periods be adjusted for a cumulative effect. 

This cumulative effect will equal the needed adjustment to the balance of retained earnings. Some common accounting errors include mathematical mistakes, unrealistic estimations, failure to accrue expenses or revenues at the end of a period, misuse of facts, and incorrect classification. However, there is a fine-line between an error and fraud. Fraud is crime in which people or businesses purposely provide incorrect information for personal gain. Firms can commit fraud a variety of ways for a variety of reasons; it is a serious matter that ultimately misrepresents the firms financial position.

The moment a company finds an error in reporting, the error must be corrected. The company corrects errors from prior periods by making an adjustment to their retained earnings for the current accounting period. Subsequently, these transactional corrections are called prior period adjustments. When estimations are needed, it is important to use realistic and accurate numbers, so the amounts involved are accurate. The estimations that are involved with depreciation expense can be vital in the creation of their bottom line. If depreciation expense is overstated, the firms net income will be understated. At the same time, if a company understates depreciation expense, they will have a higher net income.

Consequently, estimations and non-cash expenses have a significant impact on a company's bottom line; therefore, must be reported as accurately as possible.

If a firm recognizes a change in an estimate must be made, the company must use the new, configured basis for reporting on current and future financial statements. However, no changes are to be made to prior period financial statements. Also, current period opening balances should not be adjusted due to the effects in prior periods.

If a company needs to be a change the way they are reporting entity, they must do this retrospectively. Therefore, the firm must restate their financial statements of previous periods. They must also provide the reason and nature of the change and the changes effect on the bottom line and earnings per share for all prior presented periods. 

When a firm needs to change their accounting principle, they must do this retrospectively. A change in accounting principle is when a firm changes from one generally accepted accounting principle to another: for example, if the United States were to adopt International Financial Reporting Standards, companies would have to retrospectively change their financial statements that they recorded under Generally Accepted Accounting Principles. Therefore, if a change in principle occurs, a company must change their financial statements for all previously presented periods. 

The year that the accounting principle occurs, the company must disclose the effects of net income and earnings per share that occurred during the prior periods. An adjustment to the retained earnings balance in the earliest presented year also needs to be completed. If decides to change from FIFO to LIFO it is impractical to determine the occurring effects during the previously recorded periods. Therefore, the company is not to change income from previous years. For all subsequent LIFO computations, the firm must use opening inventory for the year the method is adopted as the base year inventory. Finally, the firm must disclose the occurring effects and specify the reasoning behind omitting the computation of the cumulative effect and proforma  amounts.

There is a fine line between an accounting error and change and committing the crime of fraud. Firms and individuals usually commit fraud for the financial gain. Therefore, fear of losing your job, difficult financial goals, personal bonuses, and to maintain financial performance are all factors that come into play. For example, it is two days away from the end of the period and you are only a few sales away from earning that big bonus, but it does not look like you are going to get there. So, you decide to make a deal with a close contact to buy some inventory which you will buy back after the period. 

This is an instance of misrepresenting sales in order to get paid which is fraud. As you can see there is a distinct difference between an accounting error and change in relation to fraud. Errors, changes, and fraud are major components of the accounting profession. Fraud should try to be prevented proactively through internal control, while errors and changes should be dealt with either prospectively or retrospectively.

Available For Best Accounting Service

Challenging world of accounting means that you are like an ant to the world of giants. Sure, you got your degree but every clear minded individual knows that it is the real world where you grow and develop your skills, knowledge and expertise. The same logic applies to accounting when it comes to managing your books, writing off pay cheques, balancing spreadsheets and recording multiple transactions. If you have no backhand or preliminary knowledge or something, you may not even last a day in the professional field.

That is why for your accounting convenience, we have prepared a list of the best accounting services tips that will you get started on the right track:

Basics of bookkeeping

Not so confident about taking up the task for bookkeeping, then you could always ask a business friend or an actual bookkeeper. However, in case of an emergency or sickness, it is imperative that you brush up on your best accounting services basics for it may save your life when you least expect it.

Making a petty cash fund

Small expenses or even unexpected ones are avoidable with this best accounting service tip. They are small because they do not necessarily require the need to write off any cheques or the use of credit cards. That includes buying pens, staples or cleaning supplies. You should document every purchase that is made with fund and replenish when required. Keep in mind to do some extra counting in order to ensure that the amounts are balanced out on both ends.

Make it simple

This best accounting service tip shows that you must keep your record keeping methods simple and to the point. As your work with your industry you will be able to learn, adapt and develop experience that will help construct exceptional best accounting services. Taking on the situation head on without a base or a plan is simply betting all your chips in one go and failing.

Traditional and contemporary bookkeeping methods

Managing your books using a pencil may be years out of style but it still works. Electronic bookkeeping is fast but at times without the human element of revision, can draw out some nasty results such as inaccurate balance sheets and more. Using a paper assures more credibility about the accuracy of your results.

Accounting And Auditing In Thailand

Tremendous economy growth rate in Thailand from 1982 to 1996. During the period of 1065 to 1996, the economy of Thailand grew by an average of 12.2.% annually. But, it had also seen the crisis that has changed its processes of industrial growths. In current years, Thailand has been emerging as a great industrial hub which would cater lots of opportunities to people an industrialists. And to enhance the process, it needs quality accounting processes to record its growth. Currently, Accounting and auditing standard in Thailand are developed by ICAAT which stands for institute of certified accountants and auditors of Thailand. The accounting and auditing guidelines for preparing financial statements or government taxes follow ICAAT standards. However, the accounting in Thailand is different from other countries, but the process that are utilized are similar to GAAP (generally accepted accounting principles) of united States of America.

Till now, ICAAT has issued over sixteen accounting standards which govern accounting policies, EPS (earning per shares), Income statements, government taxes and various accounting changes which have been evolved in current years. Accounting in Thailand is governed by  the board of supervision for auditing practice. The board controls the accounting and auditing standards of Thailand and makes changes once it sees some types of improvements in existing auditing and accounting polices.

Therefore, let us have a quick look at accounting processes of Thailand:

1.  Corporate and the personal income tax in Thailand comes under the direct tax.

Unlike other countries, accounting in Thailand is a little bit different from other countries. In Thailand, both CIT (corporate income tax) and PIT (personal income tax) are parts of direct taxes. The corporate income taxes are levied on any company or partnership firms which are formed under the Company Act of Thailand. The rule are same for the companies even if they are from foreign countries. However, there are a few differences of accounting in Thailand for the companies which do have their origins in other countries e.g. the foreign companies need to fill up quarterly profit and loss statement, and they need to submit it to the governing bodies of Thailand.

2.  All the companies which operate in Thailand need to prepare records of transactions. These transactions can be any type e.g credit transactions or debit transactions. Also, all the companies need to prepare a list of transactions which are done to buy things from other countries. These rules are also applicable to any type of business entity that operates from Thailand e.g. limited companies, partnership firms, registered offices, regional offices and even for proprietary firms.

3.  All the records need to be checked by accountants.

All the transactions and business obligations are needed to be clearly monitored by professional accountants to rectify any type of error. Also, all the records should be submitted within four months after the end of a financial year.

4.  Accounting in Thailand for a company which is just incorporated.

Thailand companies very successful and management excellent department.