Impact of Digitalization and Automation of Financial Reporting

This report assesses the impact of digitization and automation on financial report generation and accuracy, and the ability of financial reports to be delivered transparently and build stakeholder trust. This report builds upon previous empirical and theoretical frameworks and discusses the shifting of financial reports from traditional cycles to an ongoing, instantaneous, and technologically advanced paradigm. The focus is on the impact of automatic data processing, artificial intelligence, and integrated accounting systems on the preparation, reporting, and effective utilization of financial data. The literature indicates the extent to which automation improves the speed of reporting, reduces the incidence of manual oversight, and improves the quality and reliability of financial reports. Digital reporting systems enhance and streamline internal control systems through automated real-time oversight, standardized workflows, and accessibility to complete audit trails. This contributes to the availability of more transparent and useful financial reports, which, in turn, contributes to stakeholder trust in the financial reports. Increased dependence on digital tools also poses new problems, including possible system failures, cyber threats, inadequate data governance, and weak automated report generation controls, as isolated case studies report. Other literature hints at inadequate institutional settings and varying skill levels as also hampering digital financial reporting in poorer and developing transition economies. The drive towards digitalization and automation is deeply changing financial reporting, but as Smith (2018), Greenman (2017), and Ignatenko and Sarapina (2018) have said, ‘the full extent of the benefits is dependent on the existence of appropriate institutional, regulatory and governance arrangements that ensure the integrity, accountability and trust of the system.