Case study: Sahira has received employee complaints about the lengthy time it takes for her team to create financial reports. Sahira’s team explains that the computers are the problem and that the software programs are too difficult to use and that many hours of manual manipulation of data are required to complete monthly reports (Colorado State University-Global Campus, 2014, p. 6, ¶3).
Issues of delays in financial reporting generally emanate from two root causes: 1) data reporting system problems (data input and software integration), or 2) insufficient training (operator error), and sometimes a combination of the two (of course, new software would require retraining in any event). Given the widespread nature of the problem in this case, operator error due to lack of or insufficient training likely is not the root cause of the problem (although that may be the initial target for potential solution). Consequently, the management dilemma here can be defined as: Financial reporting delays. The management and research questions should address how to fix the cause of the financial reporting delays (Formulating the Research Question Worksheet, Appendix).
Financial Reporting Delays: Can Collection and Management of
Financial Data Be Improved?
Every company, public or private, is faced with the issue of integrating its internal operating reporting systems into its accounting software in order to provide timely monthly financial reports to its stakeholders: management, other employees, shareholders, and often government regulatory entities, i.e., the U.S. Securities and Exchange Commission, or local, state, or federal taxing or regulatory authorities (Cathro, 2012). The best, and thus most efficient, information systems (IS) e...
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Cathro, C. (2012). Financial reporting at the speed of business: It's possible. Businesswest, 28(9), 30.
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Institute of Finance & Management. (2012). XBRL solutions speed the close-to-file-and-report cycle. Controller's Report, 2012(7), 7-8.
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Management accounting in organisation is very important for decision-making and to make the business more efficient and therefore increasing its profits. Is the process of preparing accounts that can help managers to make day-to-day and short-term decisions, by providing them with accurate and timely key financial and statistical information...
Riordan has three operating facilities and they all have their own financial systems. The three facilities provide data input in the consolidate...
Dey, A. (2010). The Chilling Effect of Sarbanes-Oxley: A Discussion of Sarbanes-Oxley and Corporate Risk-Taking. Journal of Accounting And Economics, 49(1-2), 53-57. doi:http://proxy.ulib.csuohio.edu:2279/10.1016/j.jacceco.2009.06.003
In 2002, Congress passed the Sarbanes-Oxley Act (SOX) to strengthen corporate governance and restore investor confidence. The act’s most important provision, §404, requires management and independent auditors to evaluate annually a firm’s internal financial-reporting controls. In addition, SOX tightens disclosure rules, requires management to certify the firm’s periodic reports, strengthens boards’ independence and financial-literacy requirements, and raises auditor-independence standards.
In conclusion, internal controls include separation of duties, assignment of responsibilities, third-party verification and the use of mechanical and physical controls. In and of themselves, these tactics stop and prevent much abuse of the bookkeeping and accounting systems. The addition of Sarbanes-Oxley requirements in 2002 require that a company enact internal controls and assign responsibility of the control system to executives and directors, further providing insurance that financial reporting is accurate. Without this insurance that reports are accurate, company stock will fall and investors will be lost. Even with intrinsic limitations, the positive aspects of good internal controls far outweigh the negative implications. Good internal controls equal accurate financial records and future company success.
The drawbacks to these types of programs are very few. They all streamline the processes of employee compensation, time keeping, benefit schedule and timeframes for evaluations for improving productivity. These chores used to be done by hand, filed by hand, and updated by hand, this could be, depending on the size of the company and the number of employees, a daunting task, expensive in and of itself. However, having said that these programs make an HR professionals’ life a bit easier, one would tend to think about those individuals in the workforce who are not computer literate and therefore may be unable to access such programs. It is true that time will correct this situation as most school age children today have learned computer literacy but until then a solution must be made available for this factor. Other than the problem of the computer illiteracy these programs are viable and a valuable tool to help in sust...
Romney, Marshal, and Paul Steinbart. Accounting Information Systmes. 10th ed. Upper Saddle River: Pearson Education, 2006. 193-195.
Accounting/Finance application systems like Peachtree, Net Suite and QuickBooks let you manage your business with a little or no experience. All three application systems allow the users to manage the companies' capital including bookkeeping, inventory, non-inventory & service items, sales orders, purchase orders, and reports. It allows the companies to keep tracking of the financial assets and at the same time have the information the accountant needs. Using the accounting/finance application system, makes it easier to enter and process the data rather than manually enter and process the data.
Schofield (2014) researches the difference between public and private company financial reporting. For instance, a private company has fewer consumers reviewing their financial statements, whereas public companies could have multiple consumers reviewing financial statements. In addition, private companies typically have less specialized accounting personnel, whereas public companies will have several. Lastly, Schofield (2014), reviewed the number of amendments proposed and finalized to help benefit private companies financial reporting.
According to the conceptual framework, the potential users of financial statements are investors, creditors, suppliers, employees, customers, governments and agencies, and the general public (Financial Accounting Standards Board, 2006). The primary users are investors, creditors, and those who advise them. It goes on to define the criteria that make up each potential user, as well as, the limitations of financial reporting. The FASB explicitly states that financial reporting is “but one source of information needed by those who make investment, credit, and similar resource allocation decisions. Users also need to consider pertinent information from other sources, and be aware of the characteristics and limitations of the information in them” (Financial Accounting Standards Board, 2006). With this in mind, it is still particularly difficult to determine whom the financials should be catered towards and what level of prudence is necessary for quality judgment.
This scenario is used to show that accountants of today must continue to seek training opportunities on new and emerging technological advances. Continuing education is important in many professions, but is especially important in the accounting field. According to an interview with Mats Olsson of Sweden, who is a member of the International Federation of Accountants (IFAC), Small and Medium Practices Committee (SMP) by Giancarlo Attolini, who is the Chair of IFAC: We need to be more open-minded about emerging technologies as our work will likely become more computer-based. Ultimately, what differentiates one accountant from another is not their ability to manage IT, but rather their ability to better communicate with clients, to use the time saved by technology to develop client relationships and become a successful, trusted business advisor. (Attolini, 2014, quote by Olsson) Accountants who fail to stay in step with technology will find themselves out of step with their peers and clients.
I am interested in conducting research and teaching in managerial accounting, auditing and assurance services and accounting information systems. In particular, I am interested in exploring the role of accounting information systems in decision making, internal control, and auditing. In order to gain an appreciation of these and related issues, it is essential for me to have a strong grounding accounting, accounting information systems, information technology, managerial accounting, as well as gain a general economic and management perspective.
The globalization of business has resulted in the need for compatible accounting standards that can be used internationally for financial reporting. As a result, the International Financial Reporting Standards (IFRS) were developed by the International Accounting Standards Board (IASB) to unify the various financial reporting methods and create a single accounting standard which can be applied to any financial statement worldwide (Byatt). The global standardization of financial reporting will increase the readability and enhance comparability of globally traded companies’ financial statements, without the need of conversion or translation. There are a few main differences between the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (U.S GAAP). The increasing recognition and acceptance of the International Financial Reporting Standards by accounting professionals in the United States, will affect the way in which the U.S will record financial statements in the future.
Peasnell, KV 1982, ‘The function of a conceptual framework for corporate financial reporting’, Accounting & Business Research, vol. 12, issue. 48, pp. 243-256, viewed 05 May 2014
Nowadays with the implementation of new emerging technologies, the way businesses keep this financial information has become computerised. At the moment businesses use computers with a computerised accounting system in order to perform many other new activities than what they were able to do in the past. Businesses can access financial information from different department in the organisation, access to the information through computers and find financial data very fast, being more efficient. (Beliss, 2013)