Executive Focus

Helping your management team find accounting issues.

Should you rely solely on auditors to identify, report and expose accounting issues your organization may have? The rational stockholder, board member, or CEO’s response these days is a resounding no. What’s the CFO have to say about all this? I’d expect the same response. While the CFO may be held directly accountable, the CFO and all interested parties need to ask not only if concrete actions are being taken to ensure accurate reporting, but is there any internal, proactive monitoring taking place to discover errors, omissions or even fraud?

Traditionally, corporate controllers, accountants and various financial types have been responsible for uncovering these types of issues. Techniques generally involve a comprehensive and comparative review of a company’s general ledger at the trial balance level. Upon review, these figures are then used to prepare financial statements. While computerized general ledgers are used to manage the transactions of the accounting process, other tools that fall into the category of financial reporting, analysis and consolidation are used to prepare the financial statements that both corporate management and the outside world uses to judge performance.

Until recently, most financial reporting tools could not present the underlying transactional details that are the basis of the financial statements. Most importantly, if the ability to view (industry term is “drill-through”) this level of detail was available, it was rarely implemented! Would visibility to this more detailed information be of value to anyone outside the financial controllers department searching for accounting issues or irregularities? Would access to transaction level detail enable a company to better analyze their internal operations and performance? I believe the answer to both questions is yes. A non-accountant might argue that some transactions might be too complex to understand. While this may be true, the majority of transactions are easily understandable by the non-accountant. What would happen if you “drilled-through” sales for the month and you were looking at one hundred thousand customer sales records? Clearly this would be too much information to digest without familiarity and access to the right tools that could provide assistance with your review.

Clearly, access and visibility to the necessary level of detail is key to identifying accounting issues within any organization. Financial reporting and analysis tools such as Applix TM1 can now offer organizations the ability to proactively perform context-sensitive reviews of transaction level detail using “drill-through” technologies. Perhaps it’s time to open up the books to scrutiny?

Reid Karabush

President

Decision Systems Inc.

September 5, 2002

For more information on helping your management team find accounting issues, please contact Decision Systems Inc. at 1-847-433-0876 or email info@decisionsystems.com