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We are officially in the era of digital transformation where technology has greatly impacted audit processes. This has ushered changes that were hard to imagine as possible about a decade back. While the accounting profession has by and large embraced technology in various processes, it was restricted to the documentation, calculation, stor age and retrieval process. However, this is all set to change as cutting-edge technology dons a greater role in auditing. The clamour for different reporting and financial statements has been growing, and technology has all the right answersv. Taking a leaf out of fintech companies for development of intelligent software Bookkeeping outsourcing company in uk. Processes that will be touched by technology will include those areas where it may be necessary for a machine to understand and use that knowledge to identify complex information. Fintech companies have been able to deploy automated solutions by leveraging the power of AI and machine learning. Auditing will similarly find a greater role for technology, beyond the present functions. For instance, technology has developed to a level where it is possible for AI powered systems to look at all the data of a company that is being audited and identify anything that is amiss. This will help auditors to turn their focus to flagged areas that need more of their attention. Evolving reporting requirements Bookkeeping outsourcing company Present audit reporting helps investors and shareholders understand the financial health of businesses. However, in the context of a data driven world with more and more information available, there is an increasing chorus for auditors to share additional information. Stakeholders are of the opinion that auditors possess more information, than what is actually reflected in the reports. And the demand is for more contextual information from auditors about how a specific conclusion was made or arrive at. Readers want to know how the auditors arrived at a conclusion. This open the floodgates of confusion. Auditors crunch numbers and make conclusions, expecting a reader to do the same is an invitation to chaos. However, technology has the ability to present relevant information in the right form for dissemination, that is in alignment with the overall findings/conclusion. Impact of revisions and penalties corporate secretarial services in ukThe Financial Reporting Council released revisions to International Standards on Auditing (UK)[1], which had more to do with the Code of Ethics. This has great significance for auditors and by extension the companies that are being audited. The changed standards, despite being limited in scope can have implications for stakeholders. This needs to be read in the context of the fines levied by the FRC, on some of the top global auditing firms for misconduct. Even as the dust began to settle over the fines and the circumstances surrounding it, most of the iconic and respected auditing firms commenced an overhaul of their systems and processes, bringing in more technology driven processes to strengthen existing processes. This will be the order of the future, as auditors look towards technology for greater compliance. Moving from sample testing to testing of all transactions In the future, auditors will harness technology to carry out checks of all transactions, and not just rely on a sampling or random check of transactions. While the certainly humungous volumes of transactions may have come in the way of checking out all the transactions in the past or the present, this is all set to change. With the use of the right technology, not only will all transactions be checked, they will be completed at high speed, which means that the process of checking will not add to the time element. And this aspect of checking all the transactions will help auditors to gain more insights about the financial health and other inputs about the organization and the domain it operates. This will be invaluable to investors and shareholders who will now be able to understand reports on the basis of checking all transactions and not just a sample. Sampling has a probability of error, which will be corrected in the future. The need for speed The new techno-social order has turned time on its head. Processes that once took a specific period of time has now been shortened drastically. As a consequence, all other allied processes and procedures are also expected to commence/conclude at proportionate speed. Effectively, this has led to a cascading effect. Audit, resultantly, requires to be concluded faster than ever before. Manual processes do not stand a chance of delivering results at speed or with the accuracy and precision required. While it is impossible for technology, as it stands now, to replace the power of human intuition in tasks as complicated as auditing, many of the tasks that are repetitive or rote in nature need to be entrusted to technology and automated processes to be able to meet the deadlines. Leveraging the power of blockchain for cost effective audit processes Blockchain is the buzzword that will continue to hold sway over businesses well into the near future. And by virtue of being a distributed ledger, blockchain is the natural bedfellow for auditing processes. Auditors need not seek information or wait for clients or third parties to furnish statements, or any documents for verification and cross-verification. Auditors can simply carry out the verifications from blockchain ledgers. With the power of offering verifiable and immutable transactional information, these ledgers will save a lot of time and money, in addition to the assurance of offering information that is accurate and free from errors. This is basically, because the transactions themselves would have been carried out only after fulfilling the criteria or conditions of all –parties involved in the transaction. Analytics only as good as the data that is fed Analytics can be only as good as the data that is fed, which means that standards also need to improve so as to offer data that is of the right standard. While systems will be powered to detect anomalies over entire transaction history, the advantage of perception that is available to the human mind and the logic of perspective will be unavailable to technology driven systems. This will make it mandatory for records to conform to certain standards. The quality of the data and the processes or technology that is available to bring in the data from many sources needs to be advanced so as to prevent gaps in data capture and its use. The need for more regulations and standards Past processes had stakeholders trying to catch up with the regulations and standards. For instance, auditors and organisations had to fulfill or meet the standards and regulations as laid down and the need of the hour used to be a scramble to meet the standards. However, with changes in the way business is conducted, there are multiple issues which cannot be met or fulfilled by existing standards. This turns the whole equation of regulations and standards on its head. Regulations and standards are now expected to keep pace with the developments and evolving changes in the world of business. Till the regulations and changes are in place, auditors and businesses will have to work within the contours of existing regulations which may not be very easy considering the inherent differences among domains. Conclusion: Auditing is a proven facilitator for growth, in addition to meeting the requirements of accounting and financial reporting. While nations have their own set of policies about the size of businesses that need to be audited or not audited, it is a proven fact that auditing is one of the pillars of growth of a business. Technological innovations will assist the acumen of humans to bring about greater accuracy, improved reporting and faster conclusion. Auditing will not be limited to random checks but will encompass the whole history of transactions for specific periods. Contrary to popular belief, technology will not take the place of humans, but will help humans in their deliverables.

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Understanding the Accountant’s Role in Corporate Governance

5:29 pm 6 July 2018

 

Accounting Compliance 

What is Corporate Governance? 

Corporate governance refers to rules, regulations, practices and principles on the basis of which organizations are managed and controlled. It identifies individuals who have the power and authority to make decisions in an organization. In its truest form, corporate governance is a systematic process that enables the management and the decision makers of an organization to tackle the challenges associated with running the organization. It ensures a balancing act between the interests of companies’ stakeholders, including investors, shareholders, customers, suppliers, the government, the management and the community. Corporate governance offers a management framework for achieving a company’s business objectives, and it entails every management function, ranging from business planning and internal controls to corporate disclosure and corporate social responsibility. The most importance task of corporate governance is to ensure the industry-wide rules, regulations, controls and policies that dictate the corporate behavior of companies, are set in place. The corporate governance in organizations is usually managed by the board of directors who shoulder the responsibility of making the right calls for improved business functions outsourced bookkeeping services. 

Corporate Governance and Accounting 

Corporate governance and accounting walk hand in hand; one cannot function without the other. Good corporate governance has become the deciding factor that enables companies to maintain a strong financial position in their respective markets. Most corporate governance failures in events across the globe have usually found the  accounting and bookkeeping services department at fault. The accounting department is the gatekeeper of all corporate governance activities in organizations. Good corporate governance builds the faith of customers in companies, thereby leading to lower capital costs in investments. Accounting is the key enabler of good corporate governance and is considered an effective means of improving the corporate governance in organizations. Accounting professionals periodically compile data to report companies’ internal activities to stakeholders. However, all accounting processes in organizations are rigorously controlled and monitored by certain global standards and regulations. The industry-wide regulations make it mandatory for companies to disclose certain information to the general public. For instance, companies in the US have to strictly follow the Sarbanes–Oxley Act (SOX) and the revised listing rules for the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotations (NASDAQ) to comply with the industry regulations on financial disclosures, committee and board nominations and auditing policies. Similarly, enterprises in the UK have to follow the rules mandated by the UK Corporate Governance Code that was published by the Financial Reporting Council of the UK. Over the past few decades, several instances of corporate dishonesty have surfaced, which have led to more stringent corporate governance norms and policies. For example, in Nigeria, Cadbury Schweppes, a major global player in the confectionery and beverages markets, was fined a whopping 21.2 million naira for presenting incorrect account details between 2002 and 2005. 

In cases such as these, accounting can help clear the picture for organizations by undertaking several tasks. It helps set up a clear code of conduct as per which the governance processes in organizations should be carried out. It is the role of the accountant to ensure a fraud risk management program is in place, conduct regular assessments of the company’s risk exposure and implement prevention techniques to avoid fraudulent activities and mitigate their impact, if any. The accountant should appoint an executive-level member from the management team who will be responsible for dealing and addressing the concerns related to frauds. The accountant should also identify security gaps in the organizational framework and formalize the roles and responsibilities of the board members, the audit committee and the personnel involved in fraud management and prevention. 

The Role of Accountants in Corporate Governance 

For an accountant, the scope of work in corporate governance is wide, and ensuring transparency and accountability in the everyday undertakings of companies is the most critical task. Accountants shoulder the responsibility of organizations in disclosing the correct information not only to the shareholders but also to the stakeholders. Accountants play a huge role in building the trust of stakeholders in a company’s brand. In corporate governance, the role of accountants is two-old. The first is to report the flow of capital in and out of various departments and monitor the undertakings carried out with the capital and where the capital is being invested. The second is to ensure a proper framework of accountability and transparency to address the interests of stakeholders. The role of accountants in corporate governance has been explained in details in the section below. 

Disclosure and Transparency Management 

The OECD principles of corporate governance mandate organizations to honestly disclose all information, including their financial status, performance and ownership, to stakeholders for maintaining transparency. Disclosures help improve the public understanding about a company’s structure and activities, its corporate policies and its performance. Disclosure requirements do not usually exert any unreasonable administrative cost burden on enterprises. Moreover, companies are not expected to disclose information that may endanger their competitive position, unless the disclosure is necessary to fully inform the investment decision-makers. Accountants facilitate the timely disclosure of all material developments that arise between the regular reporting intervals. They also support the simultaneous reporting of information to all shareholders to ensure impartial treatment. Accountants confirm high-quality standards are put in place to help stakeholders monitor the company performance, by providing increased reliability and comparability of reports and improved insights into the company performance, which, in turn, assures transparency. 

Planning 

Accountants come very handy while planning strategies for governance compliance. Companies can plan effective business strategies based on the information made available by accountants. They can decide how to function, where to invest, when to invest and how much to invest so that returns are good and stakeholders are also happy. Accountants can help companies make effective plans regarding their growth and operations. For instance, accountants can help identify areas that are incurring more costs than returns. On the basis of this information, companies can plan growth strategies in a way that not only complies with industry regulations but also ensures good returns. 

Public Accountability Management 

Companies are accountable to the public in several ways. Organizations should meet their obligations, such as paying taxes, to the public. Based on the financial status of organizations, stakeholders consider making investments. Accountants play a major role in ensuring the data reaching stakeholders is accurate and not misrepresented. Accountants also have to monitor processes to make sure companies are not indulging in unethical practices to present incorrect financials to the public. Accountants remind companies of the consumer demands, encouraging them to keep the public interests in consideration while formulating strategies. 

Shareholder Accountability Management 

As the name suggests, shareholders are entities who have bought at least one share of a company. Companies are directly accountable to their shareholders, as shareholders have financially invested in them and are also the part owners. It is the responsibility of organizations to provide complete and detailed financial information to the shareholders. Based on the information shared, shareholders can take further steps, such as increasing investments, disinvesting, or voting against certain undertakings that are resulting in losses. Accountants have the responsibility of carefully consolidating this financial information to present accurate figures to the shareholders. 

Cash Flow Management          

Accountants help companies not just plan long-term strategies, but they also help addresses short-term and the everyday necessities in organizations. Maintaining a healthy cash flow is one of the major responsibilities of accountants. They draw a clear picture of how much cash a company has in-hand, which helps priorities and take crucial financials decisions. Based on the information sourced by accountants, companies can make decisions regarding supplies, resources and equipment in a way that doesn’t overspill their in-hand cash. Accountants also help enterprises manage their line of credit and monitor all their short-term financial resources, which assists in avoiding unnecessary debt.  ‘ 

Financial Reporting and Management Reporting 

Though organizations have several departments that may or may not be interdependent, all of them are bound by a common thread called accounting. Financial reporting entails the reporting of company financials to stakeholders, whereas management reporting involves the internal management. Accountants have to manage both these processes and consolidate the company’s financial data to report accurate figures. Financial reporting helps stakeholders by offering valuable insights into the company financials, whereas management reporting offers the internal management of an organization detailed inputs and information about the state of affairs in the company. Accountants play a crucial role in helping organizations conduct both financial and management reporting. 

Conclusion 

Corporate governance is as much a social undertaking as a financial responsibility. Accounting walks alongside corporate governance, providing support in all its functions. Accountants help craft a vision for companies and assist in setting up proper controls, effective audit systems, proper fraud risk management solutions and accurate disclosures that comply with the international standards and best practices. It is the responsibility of the accountant to make corporate governance the priority of enterprises, thereby ensuring the auditing and accounting tools serve the overall governance functions in companies.     

 

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