Financial statements are any official records of all the financial activities of a certain person, a business, a corporation or any other entity. The financial information used by corporations should be complete. This information should provide the users with all details necessary and of the importance to them. It should be free from any errors or omissions. Financial information used by corporations should be relevant to them. If a corporation requires information about an investment, then the information they will use must be relevant. Financial information is expected to be accurate. This means that it should portray a situation as it is without any exaggerations. Financial information that is mostly used by corporations should be timely. This means that it should be available to the organization in time to enable the organization in decision making.
Financial information should be reliable to be used by corporations. This means that it should be compiled by trusted financial firms and should present a true and fair view of the matter in question. Many organizations use four main financial statements. These include the income statement, which shows a company’s net profit of its loss for a given period, statement of cash flows, which reports the net profit or loss excluding non cash expenses and incomes, the balance sheet which shows the assets and liabilities of any organization, and the statement of owner’s equity .
Time value for money is the doctrine that a particular amount of currency today and now has a different purchasing power of value as compared to the same amount of the same currency in the future. This is dependent on the rate of interest if invested of inflation rates.The determinates of the net present value and discount rates will include cash flows generated by an investment, where huge cash inflows result to huge net present values. The prevailing inflation rates also act as determinants of the discount rates. Financial analyst put all this into consideration when they want to give financial information to corporations.
Financial information flow outlines the movement of money into and out of a project, financial product or business. The idea of financial information is used to show how much was used in a particular time, rate of return and profits or losses that are realized by the company. Transaction processing systems use information and data either in batch transaction processing or real time transaction processing. They are used in cheque clearance, bill generation as well as in credit card transactions. These processing systems are also used in data validation that includes initiating a transaction and checking of fields (Charles Srurt University, 2014).They use data from point of sales to generate receipts, and in library loan systems to issue students with reading material.
There are various approaches to the assessment in information technology. The top to down approach is the most commonly used (United Nations General Accounting Office, 2004). This approach has different stages where the information technology investment management prepares for assessment and obtains all the background information and management overview. It then collects evidence through interviews or even documentary evidence which it later consolidates. The ratings are then done and this is the third stage in assessment of investment in information technology (United Nations General Accounting Office, 2004).
The major Information technology issues that affect the compliance requirement of financial reporting will include formatting of the financial statements to comply with the new international financial reporting standards and lack of all data. In addition, there is the lack of consistency in its collection and compilation in order to generate good financial statements. The other factors are different reporting formats making it tricky for an organization to know what method to use. Skilled personnel who are IT conversant may not be readily available and this may pose a challenge to financial reporting compliance.
Charles Srurt University. (2014, March 24). Information Processes and Technology. Retrieved March 2014, 24, from Transaction Processing System: http://www.hsc.csu.edu.au
United Nations General Accounting Office. (2004, March 1). Information Technology Investment Management. Retrieved March 24, 2014, from http://www.gao.gov/new.items/d04394g.pdf: http://www.gao.gov