Impact of Technology Development in Financial Reporting - Research Paper Example

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Impact of technology development in financial reporting

This research paper attempts to describe the effects of technology on financial reporting. One of the biggest impacts that technology has successfully made in financial reporting is the ability of various firms and companies to use the computerized system in tracking as well as recording a financial transaction. Information technology (IT) has drastically lessened or abbreviated the time spent by various accountants to plan as well as exhibiting financial information to management. The framework has permitted quick production of individual reports for different organizations. This is exceptionally indispensable since it has eased the management procedure through decision making. Different abilities incorporate; excellent external reporting increased processing rate and better accuracy. The field of information technology is developing with various accounting software finding their way into the market. The new software helps in enhancing business' accounting forms, making easy to understand, the formation of intuitive reports comprising primary reports, for example, profit and loss statements to complex ones for example confounded or complicated budgets, forecasts as well as "what if" analysis. The computerization of accounting and financial reporting makes the programs easy to use over the world. However, substantial dependence on automation frequently increases the significance of information control which as a rule may disrupt data integrity with the organization.

Benefits of ICT in Financial Management and Reporting

The ICT has the capability of enhancing, coordinating and controlling various operation of the different organization. It also increases the use financial management. Business, especially Small Medium Enterprise’s flourish well when their business process are recorded as well as reported appropriately. Usually, ICT is considered as one of the most consistent and reliable means of giving a stable platform for an efficient system of internal control over financial reporting. It is believed that ICT system delivers a sure as well as assurance medium of financial information provision that covers the complete accounting cycle of a particular firm. The ICT helps in creating a conducive atmosphere where integration of all financial transaction is made possible that would have very problematic to prepare (Williams, B. C., & Spaul, B. J. (2013). Accounting information system is the oldest as well as the most extensively and broadly used information system in a business setup.

Benefits of technology on Small Medium Enterprises

Accounting systems that are computer based records as well as create reports on cash flow inside an organization on a historical basis and deliver a basic financial forecast of future circumstances. The ICT has, in this manner, has helped a considerable measure in destroying the problem confronted by Small Medium Enterprises in the era of exact and accurate accounting information. In this way, Small Medium Enterprises business and different administrators with fundamental ICT absence are destined to experience problems, for example, misquoted financial reporting. Use of ICT tools as well as their integration with customer relationship management applications are at risk to bring various advantages, for instance, upgraded product and service quality, enhanced accommodation and customer service, customer fulfillment, improved financial execution, higher productivity through the advent of another product as well as various delivery/service channels. The remote viewing, as well as printing of and other financial archives, loan applications, balance checking, affecting transfer among others, are significant advantages supported by the new Information and Communication Technology (ICT).

Technology Impacts to Investors

ICT helps in creating enabling that integrates all financial transactions using various accounting software in the generation of financial reports needed to affect the decision of potential as well as existing investors. Well-timed and precise accounting information is invaluable to stakeholders of diverse interest. 70% of Small Medium Enterprises often use or employ the use of ICT in their financial and accounting reporting. Various technologies are available for financial reporting. Among them which is most common is the World Wide Web. Other technologies for instance direct access to computer center of various firms are also available. Given the effect of technology on rules of organizations, accounting texts, content plus financial reporting structure and professional organizations have come up with the various ways of applying the technology. Systems premeditated by authorities. Financial reporting using World Wide Web (Saudagaran, S. M. (2013).

Efficient technology for financial reporting

Various technologies affect the reporting and moving it towards electronic reporting. An example of the technologies includes electronic paper and HTLM, Fixed display of data like CD. PLUG-INS, multimedia, for instance, Microsoft Media player, 3D picture VRML, Real Player and Apple’s QuickTime. The influence of users besides scientific managers like database searching instruments, JAVA and ACTIVE/X, intelligent software, XML as well as the language of financial reporting XBRL. Information technology enables finance to work globally in financial reporting. Financial markets can be viewed as the principal arrangement, global information markets operating through organized computers (Ramin, Kurt P., and Cornelis A. Reiman. (2013.). The field of information technology is widely growing with various accounting software finding their way into the market. The new software helps in improving business’ accounting processes, creating user-friendly, the creation of interactive reports consisting simple reports such as profit and loss statements to complex ones for instance complicated budgets, forecasts as well as “what if” analysis. The automation of accounting and financial reporting makes the programs easy to use across the world. However, heavy reliance on automation often increases the importance data control which in many cases might sabotage data integrity with the organization.

Global financial reporting

In the absence of Information Technology (IT), financial markets could not react to worldwide progressions and finance organizations couldn't dependably secure information meanwhile as their competitors. For example, the Internet empowers consistent access to credit scores and credit ratings to all loan pros, insurance organizations and businesses that need financially regular customers. Saudagaran, S. M. (2013), proposes that the information technology that runs social media on the Internet gives financial organizations significant information on their customers. By urging online groups identified with their items, finance organizations get information as well as empower mark steadfastness. According to Ramin, K. P., & Reiman, C. A. (2013) he views the phenomenal upsurge growth in the internet, telecommunication technology as well as the software as a great and having vital impact on the financial reporting practiced globally. “Technology has eased the preparation of financial statements (Ramin, K. P., & Reiman, C. A. (2013) p.321”. This has provided information promptly especially when investors need them. This is compared to the traditional mode and frequency of reporting financial matters which is viewed as slow and lack relevance. “Technology has the impact on minimizing the geographical distance, and therefore investors will be able to receive timely financial reports regardless of the nationality as well as the geographic distance of the entities where they have invested p.345”. They suggest that the traditional hard copy yearly reports might soon be wiped away and become obsolete. It will be interesting and fascinating how the arising development will affect various constituents of international financial reporting in the near future. IT utilization will prompt online financial reporting that make the data consistently accessible on the Internet. Decision-makers would thus be able to utilize time and different data for making decisions and they can find specific data that they require for a specific objective (Parker, X. L., & Graham, L. (2008). In this manner, by methods for on line financial reporting, financial data will dependably be given on time. Results of this research demonstrate that IT affects the nature of financial reporting and this effect is made through reporting. IT moves reporting towards online reporting, and this sort of reporting produces data using specific qualities (Bergeron, B. P. (2012). 

Technology in effective Auditing

Computers and networks give most of the data required for auditing. To be convincing, auditors use the computer as an auditing tool, review automated systems, and information, appreciate the business purposes for the systems, and fathom nature in which the systems work. The other basic uses for computers and systems by auditors are in review organization. By searching for new uses for computers and correspondences, auditors improve their ability to survey systems and data and manage their activities more suitably. Automated devices empower auditors to extend benefit and that of the review work. By seeing the significance of rising condition and essential to performing review undertaking sufficiently, auditors must comprehend the key inspirations to use review instruments and programming. David Yang and Liming Guan (2004) examined the advancement of auditing in the fast heightening of innovation, which transparently adds to information technology (IT) auditing and inward control principles and rules. Innovation, information system, and electronic information processing have changed the way associations carry out their business, advancing operational effectiveness and help basic leadership. In this pith, and on account of United States (US) as being explored by the authors, different definitive bodies, for example, the American Institute of Certified Public Accountants and the Information Systems Audit and Control Association (ISACA), have issued norms to encourage and give adequate direction to auditors.

Current Use

Nowadays, businesses can't get by without information technology. All organizations use some accounting software. Every one of these ventures works correspondingly. Information is physically contribution to the database by an individual from the accounting office. The software records the information in perspective of the system worked in procedures and recouped information in light of customers investigate/reporting criteria. The yield can be passed on to different organizations with the use of additional software in perspective of the customer's subtle elements. Information got can have numerous applications, including audits, financial reporting, assessments of future costs, and various others. Information will be shared between different individuals from business units of an organization through messages and presentations. With the information so quickly available, managers are right now prepared to settle on energetic business decisions about organization's future and course.

Ethical and Social Implications:

The usage of information technology in accounting has upgraded financial reporting; in any case, it is as yet basic to review the information for accuracy. Making business decisions in perspective of mistaken information can be disastrous for an organization and society. Deplorably, the latest decade was rich on cases of organizations, for instance, Enron and Worldcom, utilizing mixed up information to report their financial information (Lin, C. H., Yang, H. L., & Liou, D. Y. (2015). Every organization and its financial bosses have a moral and social obligation to show accurate and complete financial reporting.

Future Utilize:

Information technology is an incredibly developing field, and it will keep on enhancing business operations, including corporate finance. Speculations into computerized security, inner surveys and controls will make more trust in the information gave in financial reports. As clearly clear by organizations interests in to computerized security, numerous organizations are understanding that while their current working software is an amazing contraption to give required financial information, it can't be relied upon just without any other individual's info and need going with forms, for instance, security, review, check and controls. At present, working accounting systems are constantly being climbed to give better controls inside and allow better balance checking and reporting tools.

Conclusion

The effect that technology has effectively made in financial reporting is the capacity of various firms and organizations to utilize the mechanized system in tracking as well as recording a financial transaction. Information technology (IT) has drastically decreased or abbreviated the time spent by a few accountants to get ready as well as presenting financial information to management. The system has permitted brisk formation of individual reports for different organizations. This is exceptionally imperative since it has eased the management procedure through decision making. Considering the consistently growing advances of IT. It is ordinary that the impact on reporting and like this on subjective attributes of accounting information will continuously improve because by using more moved advances will the information be more relevant as well as the reliable quality and resemblance of information will be raised, and limitations will be decreased. Then again, considering the educational prerequisites of clients and the deficiencies of the present reporting model, it winds up plainly clear that the financial reporting model ought to finally push toward online financial reporting. Along these lines, it can be normal that the accounting arrangement of the nation will change the accounting calling at the same time with changes in IT, keeping in mind the end goal to adjust financial and accounting data to the fast changes of the present business world.