diff --git a/apps/zasm/const.asm b/apps/zasm/const.asm
index 1781d09..2f9db4e 100644
--- a/apps/zasm/const.asm
+++ b/apps/zasm/const.asm
@@ -11,3 +11,5 @@
 
 ; Value specified doesn't fit in its destination byte or word
 .equ	ERR_OVFL		0x04
+
+.equ	ERR_FILENOTFOUND	0x05
diff --git a/apps/zasm/directive.asm b/apps/zasm/directive.asm
index 74fd4bd..99d7b88 100644
--- a/apps/zasm/directive.asm
+++ b/apps/zasm/directive.asm
@@ -184,13 +184,21 @@ handleFIL:
 
 handleINC:
 	call	readWord
-	jr	nz, .end
+	jr	nz, .badfmt
 	; HL points to scratchpad
 	call	enterDoubleQuotes
-	jr	nz, .end
+	jr	nz, .badfmt
 	call	ioOpenInclude
-.end:
-	xor	a		; zero bytes written
+	jr	nz, .badfn
+	cp	a		; ensure Z
+	ret
+.badfmt:
+	ld	a, ERR_BAD_FMT
+	jr	.error
+.badfn:
+	ld	a, ERR_FILENOTFOUND
+.error:
+	call	unsetZ
 	ret
 
 ; Reads string in (HL) and returns the corresponding ID (D_*) in A. Sets Z if
diff --git a/tools/tests/zasm/errtests.sh b/tools/tests/zasm/errtests.sh
index 596f4c8..b48d8cf 100755
--- a/tools/tests/zasm/errtests.sh
+++ b/tools/tests/zasm/errtests.sh
@@ -32,5 +32,8 @@ chkerr ".equ" 3
 chkerr ".equ foo" 3
 chkerr ".org" 3
 chkerr ".fill" 3
+chkerr "#inc" 3
+chkerr "#inc foo" 3
 chkerr "ld a, 0x100" 4
 chkerr ".db 0x100" 4
+chkerr "#inc \"doesnotexist\"" 5