Tackling the Accuracy Challenge

by Craig Clay

Four of the biggest challenges companies are now facing with regard to filing accuracy.


CFOs and compliance managers must navigate a complex landscape of financial regulations. Due to an ever-changing patchwork of federal and state regulations, financial managers certainly have their work cut out for them this year, as filing accuracy has become more challenging than ever. 

Another element further complicating the process is the growing concern of data integrity. The more hands involved touching the numbers, the more work required to validate that the numbers haven’t been accidentally altered. 

Furthermore, it can be a challenge to keep people on staff who are experts in SEC regulations, managing documents, and XBRL.

The numbers help tell the story. According to an analysis in Digital Financial Reporting, among 5,856 10-K filings with the SEC earlier this year, roughly 20 percent contained errors and had to be refiled.

For corporations that must refile financial statements, there is a significant monetary cost in terms of the time and additional resources required to remedy the situation. Then there’s possible punitive action by the SEC and/or other regulatory agencies to consider.

There is a larger cost as well. Companies that have to refile will have their credibility and competence questioned by investors, customers, and the media. Ensuring accuracy goes a long way in preventing that scenario and protecting the company’s reputation.

Against the backdrop financial managers need to consider a) whether their practices to ensure accuracy of financial statements are adequate and b) whether they have the tools—combined with proper staffing and monitoring—to improve the process.

With that in mind, here are four of the biggest challenges companies are now facing with regard to filing accuracy.

Breaking Down Corporate Silos 

Accuracy in financial reporting requires cohesion among a company’s business units, 

legal and finance. That’s easier said than done for large companies with lots of tentacles. But by taking an integrated approach, managers get an aerial view of their financial reporting and can more easily delegate responsibilities when something needs to be amended. Companies are able to break down silos with technology solutions like virtual data rooms and collaborative software that enables multiple users to edit the same document, rather than multiple versions that lead to bad data. This approach ensures nothing falls through the cracks and the data remains accurate throughout the process.

Ever-Multiplying Data Reports

Half of the battle with accuracy is making sure the swell of financial data is current and up to regulatory compliance. The ability to update and integrate hundreds of data points to populated financial statements and financial schedules via separate sources throughout the enterprise is critical. The regulatory stack is unrelenting, so companies must be able to instantly update their financial data and create systems to accurately format multiple tables and documents.

Cybersecurity Risk

Monitoring for security breaches should be at the top of the corporate agenda. In a post-digital age, cybersecurity is no longer the concern of just CTOs and CIOs. A slew of top brands has been hacked in the last few years. For many companies it’s not a question of whether their computer systems will be attacked, but when. The problem will get worse before it gets better. Ensuring that technology used to manage and store data has up- to-date security is critical. 

Leveraging New Tools

The accelerating pace of technology continues to create new ways for companies to reduce risk and increase efficiency and accuracy of reporting. New software that automates data collection and integration can save hundreds of hours in the filing process for a large and complex organization.  However, many companies are behind the curve in implementing such tools, preferring to stick with manual processes and old software solutions, typically due to a comfort level or lack of investment.

That doesn’t mean new technologies guarantee accuracy. Some come with their own, new risks. For example, an increasing number of corporations now use self-filing software to submit their financial statements, nearing 30 percent of all SEC filings. This can be a great option for organizations with limited resources—as long as everything goes according to plan. When errors or complications do occur, financial teams need to ensure that they can access knowledgeable subject matter experts who can advise on regulations and reporting, not just tech support.

The complexity of filing will only increase. Companies must enhance their practices to meet the challenge effectively. For regulators and investors alike, accuracy is everything, so looking ahead and preparing with the appropriate resources is critical to success.

Craig Clay is the president of global capital markets at Donnelley Financial Solutions.