Accounting Industry Technology Framework
The two primary accounting frameworks are the generally accepted accounting principles (GAAP) as well as the international financial reporting standards (IFRS). Two primary stages of audits used in implementing these frameworks include planning and risk assessment as well as internal controls testing.
Generally Accepted Accounting Principles (GAAP)
- GAAP is the acronym for Generally Accepted Accounting Principles. GAAP refers to a cluster of accounting standards, as well as a widespread industry standard developed many years ago. GAAP is used by various organizations to organize or group financial data into accounting records properly. GAAP is also used to summarize accounting records into separate financial statements or disclose specific supporting accounting information.
Tasks Performed Under the GAAP Framework
- Some topics or tasks that the GAAP framework introduces to a company's financial statements include activities to evaluate assets, liabilities, equity, leases, foreign currency, expenses, and income. It also proposes hedging and derivatives, non-monetary transactions, industry-specific accounting factors, business combinations, and fair value.
- Companies that utilize the GAAP framework are required to evaluate and report their earnings per share, also known as GAAP EPS. These companies may be required to report their Non-GAAP EPS whenever there is a possibility that their GAAP EPS is misleading, or it is not a true representative of their "core" performance.
- Companies using the GAAP framework are required to file 10-K as well as other related filings in compliance with GAAP as well as other "SEC disclosure requirements."
International Financial Reporting Standards (IFRS)
- International Financial Reporting Standards (IFRS) is the international framework used in accounting. IFRS is used to organize as well as report financial information accurately. It is the brainchild of the International Accounting Standards Board (IASB) based in London.
- The IFRS framework is currently the mandatory accounting framework in over 120 countries.
Tasks Performed Under the IFRS Framework
- All foreign portfolio investments (FPI's) using the IFRS framework in the United States are required to prepare their financial statements in line with IFRS, as demonstrated by IASB. Such FPI's are subject to Rule 405 of the S-T Regulation and must submit their financial statements in XBRL with an IFRS Taxonomy as specified on the website of the Commission.
General Tasks Performed for The GAAP and IFRS Platforms:
- Some tasks related to tasks implemented though processes of the financial accounting industry that are not dependent on any framework include:
Real-Time Status Confirmation for Financial Matters
- Some general tasks performed to implement a financial accounting process, regardless of the framework is real-time confirmation of the status of financial matters.
- Artificial intelligence (AI) can process documents in real-time using natural language processes as well as computer vision. This process can give faster insights into financial positions when compared to manual daily reporting, which is more expensive. One benefit of using AI for real-time financial insights is that it helps companies to be more proactive and makes it more feasible to implement adjustments if acquired data indicates an unfavorable trend.
Automated Authorization or Processing of Documents
- Regardless of the framework used, financial accounting companies should automate the authorization as well as processing stages of their documents. This process can be implemented using AI technology.
- AI enhances several internal accounting processes like procurement, purchasing, invoicing, preparation of purchase orders, expense reports, accounts payable as well as accounts receivables, and more.
Audit Compliance through AI
- Experts recommend the use of artificial intelligence to implement audit compliance.
- In financial accounting, there are several mandatory internal corporate, state, local, and federal regulations. Fraud accounts for billions of dollars lost every year, and financial services companies often loose about $2.92 in costs for every single dollar of fraud perpetrated.
- It is vital to use machine learning algorithms to quickly navigate through large volumes of data to identify potential fraud cases or suspicious activities that might otherwise get lost when humans get employed for monitoring. AI can flag potentially fraudulent or non-compliant issues for further review.
The research has reviewed typical technology frameworks in the accounting industry. The study also examined why, how, and what type of tasks are completed by identified portions of the accounting industry technology frameworks. The research reviewed accounting tool publications, government agency regulations for the financial accounting industry, and credible media publications, among other resources. This strategy revealed typical technology frameworks in the accounting (finance) industry. It also disclosed some tasks to be completed via the identified portion of the framework based on regulatory requirements. However, there were limited insights on why the tasks identified via the research relative to GAAP and IFRS are essential outside the fact that they are requirements put in place by government agencies. The study includes the reasoning actions or tasks recommended by Bernard Marr & Co (Bernard Marr & Co is a leading independent think tank as well as consulting organization in the world). The reasoning associated with the recommended actions relevant to financial accounting companies were uncovered via this strategy, although they are not specific to any technology framework.