Reducing risk associated with financial reporting fraud
28 November 2019
During the 1990s and 2000s, a series of financial reporting scandals catapulted the issue of ethics in accounting into every headline around the world. The well-publicised scandals at Enron and Tyco shook the confidence of investors everywhere when published annual reports and accounts, as well as other publicly available information, were found to contain misleading information into how affairs were being managed.
While it may be difficult to assign a ROI to reducing financial reporting risk, there can be little doubt that bad practice in the past has had a significant negative impact on shareholder value. The above scandals can be considered proof of the failure of the corporate governance models and the risk of accounting standards not requiring relevant disclosure.
Many years later, regulations have tightened globally imposing new mechanisms of governance and increasing transparency through the issue of new and revised accounting standards that require more relevant disclosure. To reduce financial reporting risk, organisations should start from the top, with the CFO taking ownership of the effort and assembling a cross-functional team of accounting, information technology, human resources, and operational resources to work together and understand where every department stands with respect to financial reporting risk. These individuals should collaborate to design, plan, implement, execute and monitor risk managing activities and programs. Inherent and specific risk areas for their organisation should be assessed and identified with the goal of developing a future state based on the assessment. Like any other business process, it should be undertaken systematically with clear goals and objectives.
Ideagen have helped support many companies worldwide over the past 25 years with their goals in reducing risk. With Ideagen’s automated financial disclosure tool, Pentana Disclose, companies such as PwC, EY and Grant Thornton have been able to safeguard their companies’ reputation, mitigate risk, increase efficiency and assure customers and regulatory bodies that they are up to date and compliant with relevant accounting standards. Pentana Disclose provides accountancy firms, audit firms and finance professionals within any industry the confidence that they are working in line with up to date changes to Companies Legislation and UK accounting standards, including FRS 102 (or ‘new UK GAAP’) and relevant Statements of Recommended Practice (SORPS).
Contact us today to learn more about Pentana Disclose