Nowadays the business applications are highly sophisticated with semi-automated data processing systems; however human error continues to be the black sheep of financial reporting quality.
According to “The Top Tax & Accounting Mistakes” from Bloomberg BNA, the most common accounting and financial reporting mistakes come from the users’ practices and the bad adoption of their business environment.
The report highlights the top-end users’ mistakes:
- The first cause of poor data quality comes from manually inputting incorrect data in an enterprise system, cited by 27,5% of financial and accounting professionals
- Saving a file with corporate financial data to a personal device (18%) or sensitive financial data to cloud apps (11%), carrying out data and security breaches.
- Accidentally deleting customized Excel formulas, cited by 17%.
- Overriding system data with numbers calculated outside the information system, 13%.
- Working with sensitive data on a non-secure public WiFi network, which can breed financial damage and reputational risk.
Data errors aren’t not that easy to identify, an error could have a short-term effect and even generate long term harm. Bank of America miscalculated its regulatory capital in 2009, and the error was carried over until it has been noticed in September of 2014, leading to a $7.7 million fine¹.
The most common rule-based mistake, identified by 12% of respondents, is closing the books before all of the requisite data has been collected, a typical mistake for financial services. The study also highlights that the companies modify asset information from past years, cited by 10% of respondents, in this case, healthcare organizations are the most likely to cite difficulty with city-specific regulations.
To reduce these potential mistakes is essential to go to the source, Bloomberg suggests involving end-users in the planning of new softwares to better addresse their needs and company objectives, enhancing the training and informing the users in a daily basis to adopt easily their business environment.
Sources:
1 Bank Of America To Pay $7.7M SEC Fine For 2009 Accounting Error