More than half of finance professionals and global business leaders are not completely confident they can identify financial errors before reporting results, according to a survey commissioned by software specialist BlackLine
In addition, nearly 70% of respondents believe that their organisation has made significant business decisions based on inaccurate data. Many identified this as a hidden problem, with over a quarter (26%) stating concern over errors that they know must exist, but of which they have no visibility.
Independent global research firm Censuswide polled over 1,100 C-suite executives and finance professionals in large and midsize organizations across the world to establish accuracy confidence levels in financial data and perceived impact of errors on business.
The results indicate that although over half (54%) of respondents overall still claim to completely trust the accuracy of their own financial data in general, there is a significant discrepancy between the views of the C-suite and that of finance professionals.
While 71% of C-suite respondents claimed to completely trust the accuracy of their financial data, only 38% of finance professionals said the same.
BlackLine says this suggests that CEOs are making business decisions on numbers in which they are confident, but the people preparing the statements and reports are not, thus increasing the level of risk and regulatory concerns for large organisations.
As well as the 69% who think that either they themselves or their CEO has made a significant business decision based on out-of-date or incorrect financial data, a third (36%) cite that this has definitely occurred in their organisation.
About two thirds (65%) said that a company they have worked for had to restate their earnings due to inaccuracies in financial data that were not identified prior to close.
Only 17% agreed that they could trust that their finance team/CFO had identified all errors to ensure they are reporting accurately. Respondents cited human error (41%), multiple data sources (40%) and a lack of automated controls (28%), as well as ineffective technology (28%), as contributing factors to their lack of trust.
In almost a quarter (22%) of cases, C-suite respondents said it takes up to 10 days per month for their organisation to identify errors and make adjustments, potentially wasting as many as 114 days each year.
Increased use of technology means that the acceptable margin of error with accounts is decreasing according to 39% of respondents, but despite this, 65% indicated that their organization still would not consider $2bn (£1.55bn) of accounting errors reported in their financial statements as material.
Almost all 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%), with almost a third (32%) fearing fines and jail time.
Mario Spanicciati, chief strategy officer at BlackLine, said: ‘It is concerning that so many organisations are not confident in their ability to identify errors and ensure accurate reporting.
‘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.
‘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.’
Report by Pat Sweet
