Updated August 19, 2026

ASC 842 Internal Controls: How to Catch and  Reduce Lease Accounting Software Errors

Lease accounting software can save companies time and money, but one wrong key entry can cost a company plenty. That's why strong ASC 842 internal controls — embedded directly in the software your team uses every day — are essential. The right system doesn't just record lease data; it actively monitors it, flags exceptions, and gives accounting leaders the visibility they need to catch errors before they reach the financial statements.

For accounting teams looking to reduce errors in lease data reconciliation, the answer almost always comes down to two things: automated detection at the point of data entry, and structured review workflows for anything the system flags. Below, we'll cover why ASC 842 internal controls matter, the most common lease accounting errors we see, and how software-driven controls catch them.

Why ASC 842 Internal Controls Matter

ASC 842 brought nearly every lease onto the balance sheet, which means errors that used to live quietly in footnote disclosures now flow through ROU assets, lease liabilities, journal entries, and rollforwards. A single misclassified lease or a wrong end date can ripple across multiple reporting periods. Auditors know this, and lease accounting is a frequent source of audit findings.

Effective ASC 842 internal controls share three traits:

• Preventive — the system blocks or warns on bad data at the point of entry
• Detective — exception reports surface issues that slipped through
• Corrective — clear workflows for unapproving, fixing, and reprocessing affected records

Lease accounting software should be built around all three.

How Software-Driven Controls Catch Errors

Errors occur when users accidentally enter wrong information or misapply accounting guidance or company policies. Lease accounting software should be able to catch errors that misalign with company rules. For example, if a company’s policy is to create amortization schedules only for leases that last one year or longer, but someone creates one for a nine-month lease, the software should be able to detect the error and alert the user immediately. So, too, if a user classifies a lease as operational but the other data for that record seems to match that of a finance lease, the user should automatically be alerted to double-check the classification.

If the warning is ignored, the software should note it on the record so a manager can run a report highlighting potential issues that could impact the balance of journal entries. The report should explain the problem and provide easy steps to fix it. If needed, the manager should be able to unapprove the record and alert the appropriate accountant to correct and reprocess it. Once issues have been fixed, the manager should be able to run another report on filtered criteria to ensure the affected record no longer shows any errors and approve the record.

Common Lease Accounting Errors to Watch For

These are the recurring errors that strong internal controls are designed to catch:

Misclassification Between Operating and Finance Leases

A user classifies a lease as operating when one of the five tests run indicates it should have been classified as a finance lease.

Lease End Date Inconsistencies

A user enters an end-date for a lease that is before the last day of the scheduled lease payments.

Lease Expenses Missing from Amortization Schedules

A user enters a lease expense but fails to include it in an accounting amortization schedule.

Modifications Without Schedule Updates

A user changes lease expenses, lease dates, or frequency of lease payments and does not modify the amortization schedule.

Short-Term Lease Misflagging

A user flags a lease as short term when the start and end dates are greater than 12 months apart.

Currency and Exchange Rate Errors

A user enters different local and functional currency types but sets the functional exchange rate to 1.0. When the functional currency is different than the local currency, the exchange rate should most likely not be equal to 1. This usually indicates a data input mistake but there are rare scenarios where the exchange rate could be 1.

How to Reduce Errors in Lease Data Reconciliation

Reducing reconciliation errors is less about catching mistakes at month-end and more about preventing them throughout the period. A few practices consistently move the needle:

• Push validation upstream. Configure your software to enforce company policies at data entry — lease term thresholds, classification logic, currency rules — so errors never enter the system.
• Run continuous exception reporting. Automated alerts should surface anomalies as they happen, not at close.
• Build a clear correction workflow. Every flagged record needs a defined path: review, unapprove, route, reprocess, re-verify. Ad-hoc fixes create new errors.
• Reconcile to the GL on a defined cadence. Quarterly minimum; monthly for larger portfolios.

• • Maintain a clean audit trail. Log every change, alert, override, and approval — it's how you prove your ASC 842 internal controls are operating effectively.

CoStar's lease accounting software continuously monitors lease data changes and provides automated lease alerts that prompt manager review.