Accounting Misstatements- Prior Period Financial Statement Errors

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Part of theAccounting Commons, and theFinance and Financial Management Commons

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Recommended Citation

Bachner, S E (2015) Accounting Misstatements: Prior Period Financial Statement Errors (Undergraduate honors thesis, University of

Redlands) Retrieved from http://inspire.redlands.edu/cas_honors/81

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Discovery of accounting error

Run SAB 108 materiality tests

(Iron Curtain & Rollover Method)

Process/Actions for Discovery and Treatment of Prior Period Errors Per SAB 108 Guidance

(For Public Companies)

Is the income statement materially misstated in the most recent year (or year in question), disregarding the impacts any accumulating errors from the previous periods has

on the period under scrutiny?

Yes

The financial statements are materially misstated and must be amended ASAP with forms 10-K/A or 10-Q/A.

"The previously-issued financial

statements may continue to be relied

upon The error may be corrected

prospectively."

Are the cumulative effects of immaterial prior period

errors material to the "YEAR in which the

error would be corrected or the trend in earnings?"

errors material to the Interim Period in

which the error would be corrected?

No

No

The error may be corrected as an out of period

adjustment with a transparent disclosure, or the

comparative financial statements may be revised

the next time of filing In some cases the error can

remain on the list of uncorrected errors

Yes

The error may be corrected as

an out of period adjustment with a

transparent disclosure, or the

comparative financial statements may be revised the next time of

filing

"little r revision"

"little r revision"

"little r revision"

Iron Curtain Method

All quotes are referenced from: May, John, Marc Anderson, Sarah Fitch, and Declan Byrne "Dataline: A Look at Current Financial

Reporting Issues." PWC: Dataline (2013): n pag PWC

PricewaterhouseCoopers LLP, 2013 Web 28 Jan 2014

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<http://www.nysscpa.org/cpajournal/2007/807/infocus/p18.htm>

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Research)

http://www.pwc.com/en_US/us/cfodirect/assets/pdf/dataline/dataline-­‐2013-­‐22-­‐

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<http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171624975#

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