Lessons · Accounting · why behaviour changes the number
Why behaviour changes the number
A penalty is usually a proportion of the amount involved, scaled by how the error came about. An honest mistake, a failure to take reasonable care, and a deliberate act are treated as different things, and the same underlying error can carry very different consequences depending which it was.
Hone is a place to practise a career, one idea a day. This is one of its lessons, written out in full and free to read without an account.
In beta. This lesson was written for Hone and has not yet been checked by a qualified accountant. Practice material, not professional advice. What that means.
What it is for
It explains why the first question after an error is always how it happened rather than how large it is. It is also why concealing a small mistake is so expensive: concealment moves the whole thing into the most serious category, and the penalty is then a proportion of an amount that was never worth it.
How to think about it
Establish what happened and why before estimating anything. Then correct it, promptly, and be able to show the care that was taken, because the care taken is one of the things being assessed.
Worked example
An honest error, promptly correctedThe least serious category.
A failure to take reasonable careMore serious, and it turns on what a careful person would have done.
A deliberate actThe most serious, and concealment usually lands here.
The same underlying error, three different outcomesWhich is why how it happened is asked first.
Your turn
Name what a penalty is usually assessed as a proportion of.
A penalty is usually a proportion of the involved
Solve one, graded on the server
The trap
Concealing a small error to avoid a small penalty. It moves the matter into the most serious category available, and the penalty there is a proportion of an amount that was never worth hiding.