How to Prevent Costly Financial Reporting Mistakes Align processes, systems and people to ensure compliance and peace of mind

Written by Sridhar Kuppa, CPA, MBA | Director, Transaction & Regulatory Advisory Services @ SolomonEdwards

Flawed financial reporting is an all too common quandary for accounting and finance teams at companies of all sizes. From an incorrect figure on a cash flow statement, to an overlooked deadline, to technical glitches and misunderstood regulations, opportunities for error abound.

Despite the risk of potential negative market reaction, government inquiries, investigations and enforcement actions including civil and criminal penalties, many companies continue to struggle to release consistent, accurate financial statements.

What are the root causes of reporting errors?  Inadequate processes, faulty systems and human error. Shoring up these deficits – and aligning them to function holistically – can prevent missteps and their painful repercussions.

Inaccurate financial reporting is a slippery slope. What starts as a small blunder can cause steep consequences. Mistakes take a toll on everything from a company’s reputation to its ability to raise capital, and could even cause a drop in share price as shareholders lose confidence in the organization’s ability to produce accurate reports. Errors can sour lenders on financing critical projects or cause discord with a potential merger or acquisition.

What causes accidental financial reporting errors? While the markets are tracking the company’s value and performance, regulators are watching for compliance with Generally Accepted Accounting Principles (GAAP). Accounting and finance departments are under great pressure to keep up with a dynamic regulatory landscape while minimizing costs. This can cause issues when preparing and presenting financial statements, from revenue and expense recognition problems, to faulty valuation, missing or insufficient disclosures, and other failings.

Legislative and regulatory confusion. As regulations evolve, companies need to understand new rules, requirements and deadlines to ensure U.S. GAAP compliance.

Human error and outdated technology. In an era of new and improved technology and modern models of accounting, many mistakes can be systematically avoided. With the widespread implementation of rapid, adaptable, efficient and customizable technology solutions, it is no longer necessary to manually extract data from multiple sources using antiquated technology.

The solution: Align processes, systems and people. Companies can avoid errors by evaluating, upgrading and fine-tuning processes and systems and putting the right people in place. Set a plan in motion now so you can reduce the risk of costly mistakes. Learn more by reading the full article here.

Sridhar Kuppa, CPA, MBA, is a Director in the Transaction Regulatory and Advisory Services Practice at SolomonEdwards. He helps clients identify problems and find strategic solutions in accounting, financial planning, analysis, and reporting.

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