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Financial reporting has benefits but also challenges. It takes a lot of time and costs to compile reports and follow accounting standards. There is also potential for confusion in determining when to record revenue and instances of fraud like in the Enron scandal. Auditing was developed to verify financial statements are true and fair, and if fraud is detected a qualified audit report is issued. Technology has significantly impacted financial reporting by making the preparation of reports quicker, more precise and improving quality through software applications.

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Yudisha Muttylall
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29 views

Speech

Financial reporting has benefits but also challenges. It takes a lot of time and costs to compile reports and follow accounting standards. There is also potential for confusion in determining when to record revenue and instances of fraud like in the Enron scandal. Auditing was developed to verify financial statements are true and fair, and if fraud is detected a qualified audit report is issued. Technology has significantly impacted financial reporting by making the preparation of reports quicker, more precise and improving quality through software applications.

Uploaded by

Yudisha Muttylall
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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As we have all seen the importance and benefits of financial reporting.

Now coming
to the problems of it. you must be all wondering what might be the problems despite
all these benefits.

Financial Reporting have a series of shortcomings, however. To start, it


takes a lot of time to compile a report, not forgetting the cost of building it
up. Moreover, following accounting standards can limit the opportunity for
creative accounting.[There are also instances where accounting practices
lead to confusion, for e.g., determining when revenue should be recorded
can be challenging at times, When an agreement is signed, when the goods
or services are provided, when an invoice is issued, or when a payment has
been effected. Making the best decision in this situation could be
challenging. This often leads to cases of fraud, such as in the case of Enron
scan, where thousands of people lost their jobs. Some companies may even
try to change their depreciation methods to change their profits which is
known as Window Dressing and is strictly prohibited by the Company Act
and against the consistency concept which states that once a method has
been used, the same method has to be used continuously unless the new
method provides a truer and fairer view of the company.

The presence of frauds in Financial Reporting has given a high rise to the
auditing industry. This is a process whereby the financial statements of a
company are verified by an external audit firm to check whether the figures
on the financial statements are shown at their true and fair value.

If a fraud or misstatement of figures is detected, then a qualified audit


report is issued by the auditors.
The top 4 Accounting firms currently in the world, also known as the Big 4,
are Deloitte, EY, KPMG and PwC. Internal auditing can also improve
efficiency in the business. To counter the problems with financial reporting,
there is also a need for ethical practices in the workplace. As a matter of
fact, ACCA and ICAEW, which are two major accounting bodies in
profession has ethics module in its exams to make sure that new students
are well aware of the rules of conduct that need to be followed in the
workplace. There is also IAS and IFRS reviews to ensure good preparation of
the financial statements and reduce any faultiness while preparing
accounts.
7. Impact of Technology On Financial Reporting

It would be unrealistic to discuss Financial Reporting and how it is related to


Accounting without taking into account the impact of technology. It is fair to
assume that technology has had a significant influence on how financial
reports are prepared today i.e., it has improved the quality of accounting in
the modern era. Technology has become an important side of accounting as
it makes accounting operations quicker and more precise. Long ago huge
hardcover copybooks were used to enter data manually but now,
everything is done by the use of computers. Software applications are
designed to help users with specific purposes so that they can process large
amount of data with high security and complex transactions. For example:
Sage and Oracle are integrated accounting packages that are specialized in
recording and processing transactions within a business. They can
automatically produce year end accounts and are considered being
accessible from anywhere and anytime. This is why developers are creating
cloud-based accounting software such as FreshBooks and Xero, which
produces the same results as traditional accounting software. A dashboard,
charts, bar graphs, and other graphical representations are included in this
software to clarify complex financial operations carried out in a quarter, a
day, or a year.

With technology, there is now a high control on how transactions are


recorded and kept. This is crucial for the verification of accounts and
detection of frauds.

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