Comment: No more accounting for error

It's no surprise that the US has become very serious about its corporate accounting practices. As part of the process, the Securities and Exchange Commission (SEC) has forced the chief executives and chief financial officers of about 950 firms with annual revenues of more than $1.2bn to submit sworn statements that their accounting practices are above board.

For most of these business leaders, the image of WorldCom's finest being restrained in non-golden handcuffs is likely to haunt them for some time.

The new accountability means they will be forced to carry the can if any of their subordinates pull the wool over their eyes. Such developments do not lead to a happy working atmosphere: they are more likely to cause mistrust, fear and corporate paranoia.

Although we are often confidently told that WorldCom could never happen over here thanks to failsafe mechanisms put in place following the Maxwell empire's collapse, events in the US will have repercussions in the UK - and not just among US-owned businesses.

To help them vouch for accuracy, chief executives are likely to lean heavily on IT departments to set up automated procedures to access company-wide data. As a result, interest in business intelligence software is likely to grow.

IT departments will be under pressure to ensure business leaders can access a consistent and unified financial view of their firms - a huge challenge because it relies on collating data from a variety of sources.

The banks have already faced this problems while preparing to meet the requirements of the Basel Accord, which tightens up credit control and requires an up-to-date picture of how much cash they have at any given moment.

Pulling separate strands of data together to produce a single financial view must be the next big mission for IT departments. IT managers should prepare to get their hands dirty as the project will involve dredging up data from wherever it may lie in the sprawling corporate infrastructure.

Great care must be taken to ensure that data is consistent so that like is compared with like, regardless of the currency or source. Accounting procedures should be automated as fully as possible with annual, quarterly, monthly and even daily reports.

Progressive IT departments will also ensure that financial reporting systems are Web-enabled so they can collate data from key personnel across the organisation. Of course, security will be vital to ensure that sensitive information is only available to those who should have it.

Corporate accounting has reached a new stage in its development, and will increasingly rely on technology and automated procedures for its accuracy. Financial technology is already part and parcel of the auditing process, but its role will grow as shareholders and governments demand foolproof procedures and greater clarity.

Once chief executives have discovered the delights of easy-to-understand dashboards, which provide them with an almost real-time view of revenue and expenditure across the organisation, they are unlikely to want to let them go. Business intelligence records will also prove useful in convincing investigators that executives have acted in good faith, and have made appropriate checks before signing off their accounts.

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