Technology plays a critical role in improving tax, accounting and financial reporting, but even the most sophisticated tools remain vulnerable to good old human error.
According to a survey of accounting and tax leaders by Bloomberg BNA, the most common tax, accounting and financial reporting mistakes result from a blend of causes that include staff mistakes, improper technology use and internal business challenges.
Topping the gaffe list is the incorrect entry of manual data into a reporting system, which was cited by nearly 28 percent of the respondents.
Other common mistakes include deleting customized Excel formulas used to the calculate corporate tax data, cited by 17 percent, and overriding system data with numbers calculated manually outside of an enterprise reporting platform (cited by 13 percent).
“It’s easy for organizations to write off the occasionally erroneous spreadsheet cell or employee turnover as inevitable cost of doing business,” the report summary states. “Realistically, each of the…mistakes represents a preventable drain on corporate resources and a [potential] liability to a firm’s reputation.”
Other common accounting and tax mistakes cited by respondents can be attributed to staffers failing to follow documented policies and procedures. These mistakes, while potentially costly in the short-term, can lead to longer-term challenges if they aren’t detected, and allowed to improperly affect records stretching over multiple reporting periods.
The most common rule-based mistake, identified by 12 percent of respondents, is closing a period’s books before all of the requisite data has been collected. Almost 10 percent of respondents said their firms have modified asset information from prior periods, a move that can lead to further discrepancies later on.
Compliance with state and local tax regulations and incentive problems are another common source of process-related mistakes, with 10 percent of respondents saying their organization had applied state tax rules improperly. A similar number admitted to mistakes in tracking or applying city-specific tax regulations.
Failing to adhere to established organizational procedures can also result in potential security and data breaches. In the survey, 18 percent of the respondents said team members had saved corporate financial or text data to personal devices, and 11 percent said they’d detected employees saving financial data to cloud apps.
Similarly, 13 percent said team members have connected a device with sensitive organization data to an insecure Wi-Fi network.
To help reduce the potential frequency and severity of these common mistakes, the report suggests enhancing training on the effective and secure use of the organization’s technology tools. For example, team members frustrated by challenges in performing routine tasks effectively may be tempted to develop ad hoc workarounds that can introduce mistakes and reduce data security.•