Information technology has greatly impacted the financial services industry, especially with financial reporting. The increasingly growing innovations surrounding information technology has enhanced the quality of financial reports and encouraged more financial reports to be produced in a more efficient and readable manner. Information technology is a key player in making financial reporting processes more time efficient, removing place limitations, and making information more accessible to all users. Additionally, information technology has impacted how tasks are performed and digitalized paper methods. Here is a look at the impact of technology on financial reporting:
Technology Concerns in Financial Reporting
The basic reporting process for many financial companies consists of manually assembling data and reviewing reports. An effective and useful financial report must be able to contain specific information and characteristics, known as Qualitative Characteristics. These include:
- Reliability – Completed and honest with no impartial or misleading content
- Understandability – Convenient, easily accessible, and manageable data
- Comparability – Appropriate and stable information
- Relevance – Validated, anticipated, and a specific selection of information
Due to some technological limitations, relevance and reliability have not always been up to par with standards, and in some cases, not even possible. In the past, users would generally receive reports about events that occurred weeks, maybe even months before, which can affect many business decisions. With such late reporting, the needs of users were not met and satisfied. With financial technology as it is today, receiving real-time data is very possible and significantly improves business decisions.
Impact of Information Technology on Financial Reporting
With new technology in financial services, the reporting process can be streamlined and improved. The accelerated pace of innovation in technology gives analysts better access to reports at a faster rate, meaning that reports can now be built quickly with less margin of error. Many different entities within the financial industry have seen the benefits of such technological innovations.
Auditors & Regulators – Data analytics has allowed auditors to perform audits more efficiently and potentially provide higher quality reporting. It has also allowed them to deliver reports more frequently.
Investors – Investors are constantly looking for structured quantitative data to see the progress of their investments. With newer financial technology, investors can now receive more insightful and faster analysis in real time. This also allows analysts to perform better forecasting analysis that can potentially help companies and investors understand what the next steps can be. In turn, with these improved analyses, investors can make higher quality investment decisions that can positively affect the market.
Policymakers – To improve society as a whole, regulators and policymakers must also have a strong understanding of current events. With many technological limitations, lawmakers used to be limited to outdated reports that could have been months or even years old. With today’s advancements, data can now be extracted quickly and can be provided in more useful formats that can help to improve policymakers’ understanding of current situations inherent in society.
Finance and technology have always been strange bedfellows especially in terms of growth and workability. However, the technology innovations within the financial sector have greatly improved the way the financial services industry creates and disseminates reports today. Improved reporting paves the way for financial leaders to handle data in a more structured and quantitative manner, paying attention to both the customer and the company bottom line.