The continued influence effect of misinformation (CIE) occurs when misinformation affects memory and decision making even after correction. Here, we examined the neurocognitive processes underlying the correction and subsequent veracity judgements of misinformation. Employing electroencephalography (EEG), we examined event-related potentials (ERPs): the P300 during encoding of corrections, and the P300 and FN400 during subsequent veracity judgement. We compared ERPs between three conditions: misinformation that was retracted (retraction only), misinformation that was retracted with a correct alternative cause provided (retraction + alternative), and true information that was later confirmed (confirmation). Results showed that alternatives reduced the CIE significantly. During veracity judgements, the retraction + alternative condition exhibited a higher P300 than the retraction only condition, suggesting enriched recollection processes when re-encountering misinformation if an alternative explanation existed. In contrast, both retraction only and retraction + alternative conditions elicited a less negative FN400 compared to the confirmation condition, suggesting higher conceptual processing fluency of misinformation. Moreover, we found that greater levels of P300 when encoding retraction and alternative causes in the retraction + alternative condition were associated with improved veracity judgement accuracy. Together, these findings suggested that when providing an alternative cause in correcting misinformation, both recollection and encoding processes contributed to reduced CIE.