Errors in financial statements happen—and they’re often discovered during year-end close.
In this case study, Michael Mastruzzo, Partner, Real Estate Advisory at SAX, provides background on how our team helped a client navigate the technical guidance around errors and corrections.
Read the case study to learn how SAX approaches complexity with confidence.
Challenge
While closing its books for the year ended December 31, 2025, a company identified a potential error in its prior-year financial statements, as well as in quarterly reporting for each period within the current year. Although the Company performed an initial assessment and concluded that the impact was immaterial to the financial statements, it recognized the need for additional support to evaluate the applicable technical guidance related to errors and corrections.
Action
The Company engaged SAX to assist in evaluating the identified error within the context of Staff Accounting Bulletin (SAB) No. 99 – Materiality. Management provided SAX with the relevant facts and circumstances, including the nature, duration, and cumulative impact of the error.
Resolution
SAX team members collaborated closely with management to assess the issue, compile the relevant information, and prepare a comprehensive memorandum. The memo documented the nature and impact of the error across the affected reporting periods. The analysis supported management’s initial conclusions and provided a sufficient basis for auditor review.
Results
SAX’s collaborative approach provided the Company with the guidance and support needed to substantiate its conclusions, while also helping educate management on the judgment required in evaluating errors and corrections. For projects like this, SAX is committed to ensuring that accounting positions are well-supported by technical guidance and that management is equipped to clearly articulate those positions to both internal and external stakeholders.
“Sax” is the brand name under which Sax LLP and Sax Advisory Group LLC and its subsidiary entities provide professional services. Sax LLP and Sax Advisory Group LLC (and its subsidiary entities) practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations and professional standards. Sax LLP is a licensed independent CPA firm that provides attest services to its clients, and Sax Advisory Group LLC and its subsidiary entities provide tax and business consulting services to their clients. Sax Advisory Group LLC and its subsidiary entities are not licensed CPA firms.