An error account is a type of account used for storing compensation for errors in trading, a transaction that is not posted in a timely manner because of inconsistencies, such as an incorrect account or routing numbers to the wrong name on the account, producing a claim that needs to be resolved as soon as possible so payments can be made.

Transaction processing

When many hundreds or thousands of transactions are being done each day, and whenever there is human input involved, error accounts are necessary to keep the

audit trail An audit trail (also called audit log) is a security-relevant chronological record, set of records, and/or destination and source of records that provide documentary evidence of the sequence of activities that have affected at any time a specific ...

intact. Error accounts also play a role in improving

customer service Customer service is the assistance and advice provided by a company to those people who buy or use its products or services. Each industry requires different levels of customer service, but in the end, the idea of a well-performed service is that ...

. GAAP recommends daily or weekly monitoring of error accounts depending on volume and transaction size. It is typically up to the company or applicable government department's accounting department to monitor the error accounts that it has in place. In 1994,

Nick Leeson Nicholas William Leeson (born 25 February 1967) is an English former derivatives trader whose fraudulent, unauthorized and speculative trades resulted in the 1995 collapse of Barings Bank, the United Kingdom's oldest merchant bank. Leeson w ...

used a poorly monitored error account at

Barings Bank Barings Bank was a British merchant bank based in London, and one of England's oldest merchant banks after Berenberg Bank, Barings' close collaborator and German representative. It was founded in 1762 by Francis Baring, a British-born member ...

in an attempt to cover up evidence of his trading losses and place ever larger unauthorized trades to win back the money. In doing so, he lost over £800 million and bankrupted his employer. Error accounts can be implemented in manual accounting as well, but this is much less common in the developed world since personal computers became pervasive.

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References

* https://web.archive.org/web/20091221191957/http://dictionary.bnet.com/definition/error+account.html * * https://web.archive.org/web/20091225204039/http://jobfunctions.bnet.com/abstract.aspx?docid=147896 * https://web.archive.org/web/20110722153944/http://www.acpsec.org/en/secretariat/Dr_Kathie_Cooper.ppt Forensic Accounting use of Error Accounts * {{- Accounting terminology Accounting systems Financial regulation Transaction processing

Transaction processing

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References