Mermaid Man and Barnacle Boy III / Squirrel Jokes - S2-E4
Continuity mistake: In "Squirrel Jokes", on Spongebob's second act when Sandy laughs about the bronze fish, she is between 2 people. When you see her again she isn't between anybody.
Mermaid Man and Barnacle Boy III / Squirrel Jokes - S2-E4
Continuity mistake: In Squirrel Jokes, when Spongebob comes out for his second act, there's a back shot of a crowd, and there is one guy in the front right (from the back view) who is green. There is another front shot of the crowd and the guy completely disappears.
Mermaid Man and Barnacle Boy III / Squirrel Jokes - S2-E4
Continuity mistake: In "Squirrel Jokes", SpongeBob wants to make a joke about a fork. Someone screams "Forks?" and SpongeBob becomes more nervous. After that, the fork disappears from where it was.
Mermaid Man and Barnacle Boy III / Squirrel Jokes - S2-E4
Continuity mistake: In "Squirrel Jokes", right when he comes out of the curtains people put their hands up, but in a front view their hands are down.
Mermaid Man and Barnacle Boy III / Squirrel Jokes - S2-E4
Continuity mistake: In "Squirrel Jokes", when Spongebob tells the joke about Squirrel in the second act she's at a table alone, but in the next wider shot there's a chair next to her.
Mermaid Man and Barnacle Boy III / Squirrel Jokes - S2-E4
Continuity mistake: In "Squirrel Jokes", at the beginning of Spongebob's 2nd act when he's at his mirror backstage, a random object appears on the table.
Mermaid Man and Barnacle Boy III / Squirrel Jokes - S2-E4
Continuity mistake: In Squirrel Jokes, when Spongebob gives Sandy the flowers, the number of the flowers varies from 6 to 8 in different shots.
Mermaid Man and Barnacle Boy III / Squirrel Jokes - S2-E4
Continuity mistake: During Spongebob's act, he says to the audience, ".I'd like to give a special thanks to my friend Sandy over here" and the spotlight moves from Spongebob to Sandy. A few shots later, when Spongebob is talking to Sandy, the spotlight is suddenly no longer on Sandy. Then when Spongebob yells "Am I right?" to the audience, the spotlight is on him and as he turns to talk to Sandy again, the spotlight is altogether gone; it's not on either one of them.
Mermaid Man and Barnacle Boy III / Squirrel Jokes - S2-E4
Continuity mistake: When Patrick is struggling to carry a heavy box, he drops it a number of times on Man-ray's foot. The camera cuts away, then back to Patrick and Man-ray, and the box has disappeared.
Mermaid Man and Barnacle Boy III / Squirrel Jokes - S2-E4
Continuity mistake: In "Squirrel Jokes" when Spongebob drops his mic on the stage and he goes behind the curtain, the mic disappears soon afterward.
Mermaid Man and Barnacle Boy III / Squirrel Jokes - S2-E4
Audio problem: In "Squirrel Jokes" when Sandy is in the Bargn'-Mart and she can't decide which deodorant she wants, a fish says, "Maybe she should get both." His mouth says something else.
Mermaid Man and Barnacle Boy III / Squirrel Jokes - S2-E4
Continuity mistake: Before he comes on his second act, there is a front shot of the crowd, you see a guy in the front with his hands up, but in the next shot, which is of his back, his hands are down.
Mermaid Man and Barnacle Boy III / Squirrel Jokes - S2-E4
Revealing mistake: When we see Billy get told about the stupid squirrel, he has a sleeve going through his arm. The moment he starts talking, the sleeve disappears and his arm extends over his shirt. Around the end of the shot when he's being pulled away, the sleeve returns.
Answer: I believe this is the Season 6 episode "Spongicus".