1) What technology trend do you think will drive the most change in financial reporting? 2) Why is this your opinion 3) What specific changes do you forecast this will cause? 4) Does this mean more or less opportunities for financial professionals 5) What are you specifically planning to do to prepare yourself for these changes? The desired length is 2,000 words
The constant evolvement of technology greatly contributes to the immense changes in the financial reporting standards of organizations. In line with the new technologies, firms are forced to adjust to conform to the new techs, especially on their financial statements. Traditionally, organizations relied heavily on the preparation of books of accounts using the excel spreadsheet. Nowadays, accounting software has replaced the excel sheets. Such accounting programs include ERP, Sage, and QuickBooks. Firms have no choice but to embrace the technologies for survival. The good thing with the changes is the revolutionization of accounting standards to be in line with the industry techs. The sole purpose of relying on excels was prone to manipulation; thus, with the coming of accounting software reduces the chances of manipulations by the accountants. Audit trails have acted as a deterrent for persons who would want to circumnavigate the system and benefits themselves illegally. Systems have improved the accounting procedures and internal control systems of the organization. In the old ways of accounting, accountability, and responsibility used to evoke a lot of debates, but with the current trends in financial reporting, the two matters are to a great extent addressed by the techs. The good thing with the systems is the limitation of the extent which persons post transactions. The subdivision of duties provides the probabilities of people not colluding to steal money from the company accounts (Laeven, Levine, & Michalopoulos, 2015). The integration of online banking systems has enabled firms to monitor the cash inflows and outflows from enterprise bank accounts. Whenever money enters or is removed from the account, a person receives a notification, which one can verify and vouch for its completeness. Auditors have an easy time following up transactions in the accounting system because audit trails provide the evidence of the completeness of recording of a certain transaction to confirm whether it was done correctly. In the instance of misappropriation, it is possible to identify the amounts and the persons involved in the acts. Following transactions from the original books of account like journals is facilitated by technologies such as cloud computing where receipts and invoices are scanned and stored in the online system for easy retrieval.
Even though a receipt may get lost, finding a certified copy in the system is a onetime thing, which the auditor can verify by confirming from the providers of the receipt being legit from their side. A system is an interlock of several associations such as persons, backups, gadgets, and service providers (Wickramasinghe, Cooray, & Dissanayake, 2017). For example, a system like Sage has the providers who monitor how the system works, the accountants feeding information into the system, and the administrators verifying what is being posted. All the above persons must work collaboratively to produce verifiable reports, which can be relied upon for decision-making process. Additionally, the administrator such as the financial manager has the powers of barring juniors from accessing sections deemed sensitive such as the balance sheets and bank account statements. The chief accountant only gives logins to junior accountants to post transactions in the accounts payable section, receivables part according to the roles given to the juniors. Numerous changes in the accounting world prompt the research on the diverse trends available in the market that impacts the financial reporting standards set in the various industries. Also, a discussion follows on the changes brought about by the new technologies such as the triggering of more or less job opportunities for professionals in the financial sector. Lastly, recommendations follow on what people should do to embrace the new changes and remain relevant in the job market.
Internet of things (IoT)
The IoT has brought changes in different sectors of the economy ranging from health to finance. The innovation of sensors has contributed to the development of the financial sector of the economy in various forms. Even though the IoT techs have not been fully embraced in the finance and accounting area, in the future, the potential of industries applying the IoT is undoubted. The finance sector is impacted by IoT as follows:
The shaping of financial advice given to the clients
In the traditional form of accounting, the financial advisors used to provide information regarding financial matters in a mechanistic and manual manner, which hindered the speed at which such data was relayed. The financial expert advice entailed matters to do with tax filings, management of their accounting activities, and analyzing the incomplete data clients had. The good thing with the IoT is that accountants will be in a position to accelerate the process of advising their clients because all the facts concerning the tax authorities, changes and predictions will be at their disposal through online storage facilities. Sourcing for information stored in the cloud system is easy; thus, forming an informed opinion is quick. The acceleration process will save on time and cost. The lack of information is one of the problems financial advisers faced in the past, and it required them to manually search for that information from one office to the other. Cloud computing and storage will enable the accountants to equip themselves with vast knowledge about tax laws and changes to effectively advise the client (Gubbi, Buyya, Marusic, & Palaniswami, 2013). Because clients operate in different sectors of the economy, gathering information concerning the client would be quick in the event; there is an adoption of the internet of things such as online sharing of information on one platform. An example is where clients operating in the real estate sector can get real-time advice about any changes in the operational tax laws on rental income tax and its applicability because the information is concurrently updated on the tax authority website and distributed to other online platforms. Once the experts in the finance sector come across the new information, they can internalize it at their convenient time and give appropriate advice to the diverse customers in the industry. In conclusion, the IoT provides numerous benefits in the financial sector. The financial experts who will stay on the constant updates on the different trends of IoT and apply them accordingly are likely to be the ones spearheading the changes in the financial reporting sector and regulate its growth in the foreseeable future.
Development of new financial reporting models
With the introduction of tracking models to monitor the buying and consumption of products from the shelves of retail shops will trigger the changes in the reporting systems of different firms. The reason is that with the speed at which goods move, it will determine the accounting procedures to adopt, such as LIFO, FIFO, or the restocking and ordering process of the company. Prices have to change depending on the demand and supply market forces being experienced on the different products displayed on the shelves. The invoices will have to change and how the reporting and recording of those invoices in the accounting software of the firm. The one aspect affecting the number of invoices is the volumes of sales a firm makes in a certain period. IoT will assist in the gathering of consumers’ behavior in terms of the frequency of purchase and inventory sales. Nowadays, supermarkets and other large retailers fit their shelves or chain stores with tracking sensors, which detects on the rate of movement of goods and then sends an alert to the store managers to place requisitions on the suppliers to start sending in items for purposes of replenishing the stock. The sensors are connected to the accounting systems to leverage on the accounting procedures instituted in the firm. The installed tracking systems have great effects on the reporting process because it constantly updates the system in case a requisition is placed and items supplied. The auditing reporting is affected by the IoT in different ways because auditors will receive instant data flow from the various sources of information for purposes of analysis (Arnold, Kiel, & Voigt, 2016). For example, an auditor conducting an in-depth analysis of debtors will quickly get online invoices and receipts of payments from the debtor and the company because the information is stored in the clouds; thus, easy retrieval and sending. The advantage of auditors receiving constant data flow is that they can easily detect any errors and omissions in those financial records sent. Some of the matters are rectified on time to adhere to the IFRS and IAS.
Storage and analysis of large quantities of data
The IoT has the capabilities of bringing numerous data from various sources such as accounting software like Pastel and integrate all the information into one platform for the sole purpose of reporting. When all facts and information are gathered in one platform, it is possible to make conclusions which would propel the company to higher heights. The IoT displays data from different platforms into one central platform where users can access and process the relevant data affecting their departments to assist the managers in decision making. The many forms of tools and alternative display of accounting and reporting styles available on the IoT systems enable the accountants to create different charts of account on a visual form to inform the managers on the movement of sales within a certain accounting period (Weber & Weber, 2010). The one form platform of accounting available on the IoT enables the reporting experts to work on a common platform, which does not require the physical presence of all the persons in one office or vicinity. Working in different locations aids in the pooling of diverse knowledge and skills from various people of the world; therefore, promoting harmonization of worldwide accounting reporting styles.
My opinion on the IoT positively impacting the financial reporting area stands because the possibility of evading the evolvement of technology is impossible. Companies who do not adopt new technologies will face financial crunch issues as they will not favorably compete with high tech integrated firms. Secondly, by having IoT in the organization accounting systems will improve on the accountability of the financial reporters as they will become more responsible because they know other people are monitoring the system activities. The future prosperity is accepting and embracing the internet of things in the company finance department to inculcate the culture of prudence financial accounting.
Specific changes resulting from IoT
Some of the likelihood changes from the IoT technologies include:
In the financial preparation and reporting of published accounts such as the income statements, and cash flows. Because information will be available in one system, extracting the financial statements will be quick and easy as all the data is displayed in a common area. Since the persons feeding information to the system are accurate, it would take a click of a button to get all the statements and reports.
The monitoring process of inventories of the firm- Stock forms an important aspect of the firm because the sales realized promotes the sustainability of the company in terms of the cash inflows coming in the form of cash. IoT triggers signals when inventory is low for the store managers to restock the goods from suppliers. An integrated system like the IoT allows the seamless flow of inventory in and out of the firm without delays; thus, keeping a constant flow of goods and customers purchasing the diverse items on the display (Manyika, & Roxburgh, 2011).
Accounting job opportunities
IoT will create more job opportunities for the people, especially on the different sectors of the finance department. People will work in different regions and will not have to come physically to work from an office, which is possible through IoT sharing from diverse platforms. Not only the financial reporters will enjoy the numerous job opportunities but also the IT persons who will have the responsibility of ensuring the integrated parts of the systems are functioning properly.
Self-preparation for the financial reporting changes
The self-preparation entails learning the different components of IoT, such as the hardware and software parts. The software includes the accounting and reporting packages of the IoT system, while the hardware part entails the gadgets such as hubs and computer machines. Lastly, is to attend seminars and exhibition where the applicable ways of IoT are taught to the people in attendance.
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Gubbi, J., Buyya, R., Marusic, S., & Palaniswami, M. (2013). Internet of Things (IoT): A vision, architectural elements, and future directions. Future generation computer systems, 29(7), 1645-1660.
Laeven, L., Levine, R., & Michalopoulos, S. (2015). Financial innovation and endogenous growth. Journal of Financial Intermediation, 24(1), 1-24.
Manyika, J., & Roxburgh, C. (2011). The great transformer: The impact of the Internet on economic growth and prosperity. McKinsey Global Institute, 1.
Weber, R. H., & Weber, R. (2010). Internet of things (Vol. 12). Heidelberg: Springer.
Wickramasinghe, M., Cooray, N. H. K., & Dissanayake, S. (2017). Impact of accounting software for Business Performance. Imperial Journal of Interdisciplinary Research (IJIR) Vol-3, Issue-5, 2454-1362.