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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.

Where Financial reporting still falls short 



Modern methods of doing business are complicated. In the corporate world, the investors, executives, as well as board members, rely on numbers to make estimates of the timing, magnitude, and uncertainty related to cash flows. Such estimates help them to make wise decisions pertaining to investments in a company, acquiring a company or business. Such estimates also help in promoting appropriate capital allocation. 


However, in the real world, the picture is totally different. The first corporate financial statements, payroll service  providers in uk depend on proper estimates and they depend on honest judgment calls. The Second-standard financial-metrics help to do comparisons between companies, but they may not be accurate in judging the value of a particular company. There may be instances when executives and managers deliberately inject errors into different financial statements. 


Over a period of time there occurred many reforms in corporate accounting, however, it is still murky. In recent times a number of online platforms have emerged, and they have dramatically changed the business competitive environment. In recent years, financial reporting is mostly guided by new rules governing revenue recognition, continuous expansion of unofficial performance measures. 


Financial reporting in companies is often not accurate. There exist practices of manipulating the operating decisions that create financial reporting. In the accounting profession, finding ways and means to reduce such behavior is a challenge, outsource bookkeeping 


Problems in Financial Accounting 

Following discusses in detail the various problems in financial accounting: -  


Adoption of Universal Standards 

Accounting outsourcing, a single set of international accounting standards was created many years ago with the objective of uniting the U.S Generally Accepted Accounting Principles or GAAP and the International Financial Reporting Standards or IFRS practiced by European nations. However, the adoption of universal standards has some challenges and they include comprehending the actual value of a firm, comparing various company accounts across countries. 


However, in this context, it is important to say that the implementation of IFRS regulations varies from one country to another. Observations reveal that each country has its own set of IFRS regulations. In many countries the compliance, as well as enforcement, is weak. The independence and quality of the accounting profession are often not up to the mark.  


Revenue Recognition 

Revenue recognition is important and tricky in the corporate world. When certain products are sold in the market then it may be difficult to determine the profits that are generated from the product sale. 


Under the new GAAP rules, if there exists no objective way to calculate product costs in advance, a business is not permitted to do recording revenue from sales until the different upgrade requirements are delivered and the cost of the upgrades are known. Observation reveals that determining the costs of the upgrades can take a few years. Many are of the opinion that such type of a system can results in accounting rules influencing the way business is done. However, there are several shortcomings of the revenue-recognition system and the shortcomings obliged companies to use unofficial practices to report financial performance. Businesses and companies are trying to incorporate new and effective revenue recognition standards under the GAAP and IFRS.  


Unofficial Earnings Measures 

All types of businesses are using non-GAAP and non-IFRS measures of earnings for a long period of time. One of the popular ways is the EBITDA which is a favorite among the private investors as it is known to be quite useful in the corporate world. 

However, in this regard, it is to acknowledge that the alternative measures are usually idiosyncratic. Investors, accountants in U.K and analysts require exercising caution in interpreting unofficial earnings measures and they should look closely at different corporate explanations that may depend on managerial judgments.  


Fair Value Accounting 

Investors, accountants in U.K and executives rely on two measures to determine a firm’s asset values. First one is the original price that is paid and that can be the acquisition cost. Secondly, a fair value which is the amount the assets bring if they are sold today. During the financial crisis that occurred a few years back, the objective was to guide the auditors on the methods of determining the fair value. However, in those days, the result was quite confusing. The measurement process was quite controversial and was difficult.  


Over-provisioning and Under-provisioning 

Analysts, accountants in U.K, investors often focus on the manner in which the costs are accrued in a company’s reports. The managers often overstate expenses deliberately and that they do to fulfill certain objectives. They often choose to under-provision of an expense or a loss. Recent alterations with GAAP and IFRS rules have made overprovisioning and under-provisioning activities less egregious. Many believe that recent changes in regulations have weakened companies’ ability to manipulate various financial reports. Nowadays, managers try to alter numbers by manipulating the operations instead of the reports.  


New Analytical Tools Helps 

Nowadays, investors, accountants in U.K and company board members are more responsible as they comprehend well that manipulating operating decisions to report higher earnings in the short-term can compromise the company’s long-term competitiveness. With the changes in accounting regulations, accounting fraud is a story of the past. Nowadays, since fudging in accounting reports is very rare, the focus is on to ensure that the investors, directors are more transparent on the various operating decisions that can adversely affect accounting reports.  The various new techniques are being used by the investors and the analysts.  


Verbal Cues 

Yet another tool for detecting unscrupulous accounting practices is the verbal cues. There are many words as well as practices that are used to detect unscrupulous practices. 


Observations reveal that the financial result manipulation is prevalent in the early part of a CEO’s tenure in the office and it diminishes with time. Early years of a CEO’s tenure are periods of great uncertainty about the ability of the CEO. Sometimes, if the CEO’s engage in corrupt practices then they may distort earnings with the objective to keep their jobs. In any business, the board members, as well as the investors, require to be extremely vigilant regarding a company’s accounting practices whenever a new CEO assumes office. 

In recent times, observations suggest that more and more auditing firms across the world are failing to execute their duties. Firms like Carillion and House of Fraser are not up to the mark as far as financial reporting is concerned. They often fall short of the standard quality and because of which they are quite ill famous and unpopular. Online contents on these two firms speak volumes of their inefficiency and shortfalls. Many raise doubts on the smooth functioning of the firms because every now and then these firms give a picture that they are shutting down. For additional detail regarding financial reporting and why it falls short often, visit relevant resources available online. 





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