Professional Documents
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Activity 0 - WGBulaquena
Activity 0 - WGBulaquena
Activity 0 - WGBulaquena
Accounting Errors
According to an article on CPA Journal published by Alali and Wang (2017) 1, the
leading categories of financial restatement are due to debt and equity accounts or quasi-
debt/equity instruments with conversion options, expense recording, and revenue
recognition. There were other restatement issues which were due to changing accounting
rules, discovery of industry-wide improper accounting practices, descending
macroeconomic trends, or increased regulatory scrutiny. Majority of these accounting
errors resulted from a failure in judgment since the previously mentioned areas involved
a significant degree of judgment.
I had the opportunity to work as an external auditor of several small and medium-
sized entities, of which are mostly cooperatives. Accounting errors revolved mostly on the
investment, revenue, and expense accounts.
On the investment side, the accounting errors were mostly found on valuation and
derecognition during sale. Short-term investments were not valued accordingly, i.e. at fair
value through profit or loss, and were recognized only at historical cost. During sale, the
selling price of the asset was deducted from the same account. Hence, the account had
a negative balance and an income was not recognized. Some noncurrent investment
accounts also had negative balances due to crediting the asset accounts for the total
amount of cash received, of which an income was also not recognized. This was mainly
1
Alali, F., & Wang, S. (2017). Characteristics of financial restatements and frauds. The CPA Journal. Retrieved from
https://www.cpajournal.com/2017/11/20/characteristics-financial-restatements-frauds/
due to the unawareness of the accounting/finance team of the new memorandum
circulars issued by the Cooperative Development Authority, for cooperatives.
For revenue, accounting errors were committed through offsetting other income
earned with an expense account. This happened when income was not derived from
normal operations. A cooperative recorded rent income from non-members as credit
entries to the repairs and maintenance expense account. Another cooperative also
recorded the amount received as registration fees as deduction from the expenses
incurred in conducting the seminar.