Which two examples represent financial statement errors? Choose 2 answers.

Financial statement errors are unintentional misstatements. Option A, a miscalculation of payroll tax, is a mathematical mistake and therefore an error. Option C describes an unintentional misapplication of the revenue recognition principle, where revenue is recorded before it is earned. Because the action is specified as "unintentional," it qualifies as an error. In contrast, fraud involves intent to deceive, and disagreements over estimates are matters of professional judgment, not necessarily errors.

B. An employee receiving a kickback is an intentional act of deception for personal gain, which constitutes fraud (misappropriation of assets), not an error.

D. A disagreement over an accounting estimate, like the allowance for uncollectible accounts, reflects a difference in professional judgment, not a factual error.

1. American Institute of Certified Public Accountants (AICPA). AU-C Section 240, Consideration of Fraud in a Financial Statement Audit. Paragraph .11 distinguishes between misstatements arising from fraudulent financial reporting (intentional) and misstatements arising from misappropriation of assets (fraud) versus errors (unintentional).

2. Whittington, O. R., & Pany, K. (2018). Principles of Auditing & Other Assurance Services (21st ed.). McGraw-Hill Education. Chapter 6 discusses the auditor's responsibility for detecting illegal acts, distinguishing between errors (unintentional) and fraud (intentional).

3. Financial Accounting Standards Board (FASB). Accounting Standards Codification (ASC) Topic 250, Accounting Changes and Error Corrections. Section 250-10-20 defines an error in previously issued financial statements as a misstatement resulting from mathematical mistakes or mistakes in the application of accounting principles.