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<p>I am facing such a problem now, the old accountant of my company made alot of mistakes and auditor didn't rectify it</p>
Depends on what type of mistakes committed by old Accountant. As far I am concerned, I had to rectify all such errors in the past so that the financials records were True & fair and represents the actual position of the company.Most important draft a report regarding all the mistakes committed by the old accountant and also mention the steps taken by you to rectify such error. Such type of errors are mostly found in AR n AP ledger where accountant is too lazy is updating the record of these ledger.Fire the report the higher management of department (if that person is cooperative) otherwise someone more superior will be handy.Afterall you have to show your efficiency
Depends on the nature & materiality of the mistake, If material and affects the fairness of the financial statements, then a prior year adjustment is required by the accounting standards.
Wish you the best in your career.
That will be recorded as prior period expenses or income ,as the case may be ,depending on materiality concept
Incredible, It is the result of lack of professional skills of Accountant and Auditor. Professionalism is the Key.
The mistake and error dealt in the different way depending on its nature and materiality. Normally we deal these errors in the following way
1. Do nothing
2. Revised previous accounts
3. Only do the reclassification and revise the the comparatives figures.
There may be some other solutions but again depend on the nature and type of errors.
Make reversal or rectification JV
Depends on the materiality of these mistakes. If these are material we must make adjustment to these old statements if possible, if not so we should have its provision and note on the current year statement clarifications. But if these mistakes are inmaterial so there are no need for changes.
It depends upon materiality of discrepancies, if it affects the true and fair view of the financial statements than prior year adjustments are must.
a better solution may be derived if you describe what are those discrepancies.
first we have to check which part of the accounts has been affected. so according to that we create provisions. if the problem is not so big so we can also ignore that mistake..
As long as bank balances and company' s book ledger are reconciled, no need of prior year's adjustment, provided if there isn't a big difference in any particular head(s) which create unjustifiable difference from prior years. Otherwise prior year errors are adjusted against retained earnings or accumulated profits, after approval from the Management.
If accounts are audited then after reconciliation of differences it has to be highlighted to the auditor and after taken management's approval it will be adjusted against retained profits.
Adjustments in various similar heads will not be affected on overall profitability provided if there is manipulation b/w expenses and assets classification
Overstatement of receivables to show higher sale value or understatement in payables to depict less expenses that has to verified first from3rd party ledgers and source documents, if possible.
