Can the location in find my iPhone be incorrect??

Yes, if you have not set the Time Zone to Automatic.

Make sure you have the latest version of iOS or iPadOS. Turn on Set Automatically in Settings > General > Date & Time. This sets your date and time automatically based on your time zone.

If you can't change the time or time zone on your Apple device

Can the location in find my iPhone be incorrect??

I see you are asking about location, not time.

How much "incorrect"?

The chances of locating a device depend upon which features you selected in:

Set up Find My on your iPhone, Mac, and other devices - Set up Find My on your iPhone, iPad, iPod touch, or Mac - Apple Support

If it is relying upon GPS, accuracy can depend upon terrain. If you are in hilly terrain or someplace with tall buildings, the GPS signals may not be as reliable.

If there's no GPS at all then another possible reason for an incorrect location is explained in the section titled, "The first time that you sign in with your Apple ID on a new device" by clicking on the link for the support article 'Two-factor authentication for Apple ID' --> Two-factor authentication for Apple ID - Apple Support

"The notification might include a map of the approximate location of the sign-in attempt. This location is based on the new device's IP address and might reflect the network that it's connected to, rather than the exact physical location."

If you're connecting with wifi and not cellular, and the Internet service provider has their headquarters in another location, it may report the service provider's location and not where you are located.