Financial misreporting may be worse than you think

Financial misreporting may be worse than you think

Financial misreporting may be worse than you think

Investors and FAs are frustrated by a lack of nonfinancial information to help inform their investment decisions but a new survey highlights serious issues with financial reporting too.

More than half (55%) of C-suite executives and finance professionals say they are not completely confident that they can spot financial errors before publishing results.

Only 17% of respondents agreed that they could trust that their finance team/CFO had identified all errors to ensure they are reporting accurately.

"It is concerning that so many organizations are not confident in their ability to identify errors and ensure accurate reporting," said Mario Spanicciati, chief strategy officer at financial controls and automation software BlackLine which commissioned the study.

Tip of the iceberg
Not only is the misreporting a potential issue for investors but 70% of respondents said they have made significant business decisions based on inaccurate data, exacerbating the issue.

"The high-profile misreporting scandals we see in the news could be just the tip of a larger financial inaccuracy iceberg,” added Spanicciati. “It seems clear that not only are reporting errors prevalent, but that many of these inaccuracies remain hidden below the surface. There is no longer any excuse for not having full visibility into accurate numbers from which to report and drive business forward."

The survey of more than 1100 C-suite executives and finance professionals in large and midsize organizations across the world shows an overwhelming acknowledgment that inaccurate financial data has negative implications both externally and internally.

However, many organizations continue to be challenged by human error (41% said so), ever-increasing volume of data sources, as well as outdated technology (28%).

C-suite, finance pros split
While 71% of C-suite respondents claimed to completely trust the accuracy of their financial data, only 38% of finance professionals said the same.

Nearly all (96%) C-level respondents agreed that if inaccuracies in financial data were not identified prior to reporting, the impact would be negative including significant reputational damage (42%), an impact on their ability to secure additional investment (41%) and increasing debt levels (40%). Almost a third (32%) fear fines and jail time.

"Unless there is recognition that this is an unacceptable and unnecessary level of risk, we can expect to see an increase in large-scale financial misreporting,” Spanicciati concluded. “Business leaders have a responsibility to ensure that the processes and technology are in place to enable continuous visibility and accuracy of financial data. At a time when advanced tools to help automate controls and ensure accuracy are available and proven, there's really no excuse."

As well as accurate financial results investors are increasingly calling for additional information such as climate change risks and CSR initiatives.


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