What can be a consequence of an error in financial reporting?

An error in financial reporting can lead to misleading financial statements, which are essential for users like investors, creditors, and management in making informed decisions. When the information presented in these statements is not accurate, it can misrepresent the financial position and performance of the organization. Misleading statements can result from various issues, including mathematical errors, incorrect assumptions, or failure to comply with applicable accounting standards.

These inaccuracies can have significant repercussions, potentially leading to poor decision-making by stakeholders, loss of investor confidence, regulatory scrutiny, and potential legal liabilities. In contrast, the other consequences listed may suggest positive outcomes, but these do not align with the inherent risks associated with errors in reporting, thus reinforcing that the most accurate consequence of such errors is the misleading nature of financial statements.