Digital includes systems such as spreadsheets, databases

Digital Revolution is the
advancement of analog electronic technology and mechanical devices to digital
technology (Lee,2016, p440). This period of revolution began during 1950’s –
1970’s where technological advances such as computers, phones and the world
wide web began to surface. The Digital Revolution has had a significant impact
on the way businesses function and the advancement of technology has changed
the way many jobs like financial reporting are executed. 

Prior to the Digital Revolution and
the emergence of computers, financial reporting was much more complex and simple
accounting software did not exist. Accountants had to physically go to the
firm’s subsidiaries to check data was sufficiently collected and processed.
“Audits could be performed only by teams of accountants manually scouring reams
of financial information” (Maucaulay, 2016). This highlights how financial
reporting was only prepared manually and there were no ‘shortcuts’. Computers
were used to carry out weekly payroll calculations which calculated employees’
entitlements. Because these were identical tasks, the computer ran it as a
batch, which created the ‘batch processing’ operation.

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Financial reporting has been hugely
influenced by the role of computers. Computers keep “large amounts of data,
conduct intricate calculations and manage financial transactions” (Mathews, no
date). This includes systems such as spreadsheets, databases and accounting
software. The use of computers varies depending on a company’s size. Large
companies use a networked system to allow multiple staff to access the
accounting system, whereas smaller companies have a computer operated by one individual.
Local Area Network (LAN) and Wide Area Network (WAN) are used to share
expensive equipment or to link offices miles apart. The internet is the most
common WAN and accountants can share data wirelessly e.g. through The Cloud.

The popularity of computers has led
to the creation of applications and software which helps accountants. One way
this has helped is by the invention of spreadsheet applications and accounting
packages that are used to run financial functions like double entry bookkeeping
and organising data using graphs. This can be achieved using software e.g.
QuickBooks, Cognitive Technology, Microsoft Excel and ERP. Softwares have large
and inclusive accounting information systems that automatically collect and
process data. Packages can be tailored to fit specific needs of companies and businesses
can develop their own software to fit their requirements. Furthermore,
computers allow accountants to store large amounts of data in a compact space
which allows them to keep previous transactions. This is more efficient than large
quantities of files in cabinets. Payment records, purchases and transactions are
tracked which allows reliable auditing and analysis of business performance.

The Digital Revolution and use of
computers has benefit the accounting sector and financial reporting in many
ways. The CFA Institute believe using technology in various aspects of
financial reporting will make the process more efficient and will lead to
investors “Receiving more transparent, better-quality information on a timely
basis” (Singh, Peters, 2016). Accountants save time as computers speed up
processes and produce reports instantly. Computerised systems work based on the
same principles as double entry bookkeeping, however the function is made
easier because entries are entered once. Moreover, sharing of data is
beneficial for financial reporting as multiple people can simultaneously access
data like ledger entries and changes are available for everyone to view. This
allows several people to work on same tasks and collectively recognise errors.
Another benefit of using computers is improved accuracy of data. While data
entry is in progress, accounting programs check whether data entered is
correct, e.g. verifying whether the amount received in a payment matches the
amount due.  

Although the role of computers has drastically
helped financial reporting, there are still limitations with the technology. One
disadvantage is that accessing data from electronic filing can be harder to
find because information is “continually rekeyed for different purposes – at times,
incorrectly – misplaced, not updated” (Keyes, Hill, 1998, p 27-1). This is more
time consuming, defeating the purpose of technology. Another vulnerability is
that technology increases the chances of computer crime, cyberattacks and
information hacking. Technology allows the public to order directly to companies’
systems and make payments electronically, making companies prone to fraud and
hacking. The system manager must make sure that there is system security which is
difficult as each user needs access to facilities, but too much access jeopardises
the safety.

Overall, embracing the Digital
Revolution and incorporating computers within financial accounting has helped to
create reliable and consistent systems that organise and analyse financial data,
therefore reducing possible mistakes and strengthening the validity of
financial reporting.