Over half of public companies have overhauled their financial processes in the past year, and nearly as many expect to do it again, according to a recent Deloitte survey.
The firm polled over 1,040 executives during an
The COVID-19 pandemic forced companies to change the way they did business, relying more on technology to enable finance teams to work from home. Nearly half (48%) of the executives polled said technology implementations — including ERP implementation, automation, cloud migration and controls related to remote work and related risks — will be most likely to drive their organizations to remediate financial processes in the year ahead. Changes to accounting standards and related adoption work to comply with them came in second at 23.8%.
“Many companies are grappling with rapid changes and in some instances may be trying to retrofit new technologies into complex legacy system environments,” said Sean Torr, Deloitte risk and financial advisory managing director and controllership accounting and reporting leader at Deloitte & Touche LLP, in a statement Tuesday. “Whether digital transformation, new accounting standards and changes or other forces are the cause, the relatively high incidence of remediation activities is likely to continue if risks aren’t managed proactively.”
Other factors that may prompt changes in financial processes over the next year include a material weakness or significant deficiency remediation (cited by 6% of the respondents) or inquiries from regulators (5% of the respondents).
To help reduce the need for financial remediation or revisions, Deloitte recommends that public companies should consider reviewing their internal controls regularly, especially during periods of extended uncertainty and change.
“Since 2019, we have seen three significant, new accounting standards go into effect for U.S. public companies — lease accounting, revenue recognition and current expected credit loss — alongside a number of other smaller rules and updates,” said Matt Burley, an audit and assurance partner at Deloitte & Touche, in a statement. “The net effect of new accounting standards and technology changes cannot be underestimated, and the fact that the executives we polled see them as forcing financial process remediations further underscores the need for companies to have a solid grasp on their internal controls, especially those over financial reporting.”
Organizations should also evaluate the systems they use for accounting standard implementation and monitoring, and identify and address talent gaps in their accounting and finance teams such as data scientists for doing analytics. They should also make sure the data they use for financial reporting is accurate and as structured as possible. For unstructured data to be useful, it should be in a format that’s readable for input and analysis.
