KADUNA POLYTECHNIC

COLLEGE OF BUSINESS AND MANAGEMENT STUDIES

SCHOOL OF BUSINESS AND FINANCIAL STUDIES
DEPARTMENT OF ACCOUNTANCY

HND IIA (REGULAR)

COURSE TITLE: FINANCIAL MANAGEMENT II

(COURSE CODE: ACC 423 )

ASSIGNMENT

Question: Effect of ICT on financial management practices

 E-com, E-banking, E-business, E-Governance, etc.

 The essentials of financial management information and report.
Economic reality, timing and accuracy.
 Implications of uncertainty for financial reports.

SUBMITTED TO:
MAl. IBRAHIM YUNUSA

APRIL, 2022

1
 GROUP-4 COMPREHENSIVE MEMBERS LIST
S/NO NAMES REG. NO. SIGNATURE
1 AYOMIDE AMOS FATUROTI CBMS/20/HND/0076
2 FRANCA ENE ABAH CBMS/20/HND/0382
3 ISHA YUSHA'U YAKUBU CBMS/20/HND/0405
4 COMFORT ALEX AGUWAI CBMS/20/HND/0010
5 IDIRIS IBRAHIM CBMS/20/HND/0255
6 ABUBAKAR ABDULSALAM CBMS/20/HND/0118
7 TAOFIK A. SHOLOLA CBMS/20/HND/0230
8 EMMANUEL MICHAEL OCHOLA CBMS/20/HND/0141
9 EUNICE OMOLARA FADIPE CBMS/20/HND/0555
10 ABDULBASIR AHMED CBMS/20/HND/0348
11 JEREMIAH AWOYI EKOM CBMS/20/HND/0097
12 FATIMA ABUBAKAR CBMS/20/HND/0142
13 MERCY JOSEPH CBMS/20/HND/0204
14 PATIENCE DANIEL CBMS/20/HND/0432
15 ONU FAITH VICTORIA CBMS/20/HND/0422
16 RAMATU MOHAMMED CBMS/20/HND/0264
17 MARYAM ASAKA CBMS/20/HND/0286
18 HARUNA MOHAMMED CBMS/20/HND/0257
19 ZAINAB TEMITOPE ABDULRASHEED CBMS/20/HND/0188
20 COMFORT FUNMILAYO OBAYE CBMS/20/HND/0447
21 JENNIFER CHEKWUBE OKAFOR CBMS/20/HND/0536
22 VIVIAN ADEDSHEWA ADEYEMI CBMS/20/HND/0336
23 GRACE TOYOSI OPATOLA CBMS/20/HND/0178

24 GLORIA ARUYA CBMS/20/HND/0155

25 PEACE CHINASA UGWU CBMS/20/HND/0116
26 MURJANATU HARUNA CBMS/20/HND/0573
27 BLESSING LUCY OCHI CBMS/20/HND/0195

INTRODUCTION

2
What is information communication technology

Information and communication technologies (ICT) is defined as a diverse set of

technological tools and resources used to transmit, store, create, share or

exchange information. These technological tools and resources include

computers, the Internet (websites, blogs and emails), live broadcasting

technologies (radio, television and webcasting), recorded broadcasting

technologies (podcasting, audio and video players, and storage devices) and

telephony (fixed or mobile, satellite, visio/video-conferencing, etc.).

Financial management practices

The term “financial management practices” refers to the set of common methods

or standard operating procedures you develop for carrying out accounting,

financial reporting, budgeting and other activities related to business finances.

Each one serves to support business policies, establish accountability and provide

step-by-step instructions for completing a task or activity. It’s important to

understand that while SOPs are a component in a sound financial management

program, it’s the information an SOP contains rather than the SOP itself that

determines whether the financial practices outlined are successful in producing a

desired result.

3
Information communication technology and financial management practices

With the emergence of Information & Communication Technologies (ICTs) and e-

governance the possibility of improvement in efficiency and effectiveness of

financial management practices. The information and communication technology

is a centre of expertise in ICT business intelligence, labor market research,

policy development and workforce solutions. ICT enables industries to develop

and maintain a competitive edge in the global market to practice its services to

rejuvenate the innovative trends.

ICT refers to a wide range of computerized technologies that enables

communication and the electronic capturing, processing, and transmission of

information. These technologies include products & service such as desktop

computers, laptops, hand-held devices, wired or wireless connectivity, business

productivity software, data storage & security, network security, other related

protocols, etc. The emergence of ICT has opened multiple facets of

enterprises that collectivly interact with geographically dispersed workstations

to carry out business activities more efficiently, over digital networks. ICT has

contributed openly to eliminate time, distance and space constraints in order to

furnish the Business activities with ease and efficiency by integrating the

4
capability of high speed devices with high speed communication links carrying

multimedia information. ICT deals with the collection, storage, manipulation

and transfer of information using electronic means. Communication

technology refers to the physical devices and software that link with various

hardware components and transfer data from one physical location to another.

Application of ICT to enhance the performance of organization of all types around

the world and do not only help to cut cost and improve efficiency. In conclusion

ICT has now being accepted as the backbone for all organizations ranging from

small to big, public to private, micro to macro scale industries, education to

finance etc. ICT has the ability to enhance, coordinate and control the operations

of many organizations and can also increase the use of financial management.

Business, especially Small and Medium scale Enterprises SME’s thrive well when

their business process are recorded and reported timely. Generally ICT is

considered one of the most reliable means of providing a strong platform for

effective system of internal control over financial reporting. It stands to reason

that a sound ICT system provides a sure and guarantee medium of financial

information delivery that covers the entire accounting cycle of the firm. ICT

creates conducive atmosphere that integrates all financial transactions with the

help of accounting software to generate financial report which thereto, would

5
have very difficult to prepare. Accounting information system are the oldest

and the most widely used information system in business. Computer-based

accounting system record and also generate reports on cash flow through an

organization on a historical basis and produce important financial forecast of

future conditions. ICT has therefore contributed a lot in eliminating the problem

faced by SMEs in generation of accurate accounting information. Hence, SME

business and operators with significant ICT deficiencies are most likely to face

the problem of misstated financial information. The exploration of ICT tools and

their integration with customer relationship management applications are

expected to bring several benefits such as improved product and service

quality, customer satisfaction, higher productivity, improved financial

performance and creation of barriers to entry, enhanced convenience and

customer service through the advent of new product and various

delivery/service channels. The remote viewing and printing of and other

financial documents, applications for loans, checking of balances, effecting

transfers, etc are part of the invaluable benefits supported by the emerging

Information and communication technology. ICTs are employed greatly to support

the internet dissemination of banking service. ICT creates an enabling

atmosphere that integrates all financial transactions with the help of accounting

6
software to generate financial reports needed to influence the decision of

potential and existing investors. Timely and accurate accounting information is

invaluable to stakeholders of varied interest. They found that 70% of Medium-

Scale enterprises do make use of ICT in their financial and accounting reporting. In

the last decade, there has been a tremendous development in the field of ICTs

and its application in the financial world. In the competitive advantage of various

financial organizations has greatly increased due to ICTs. ICT has proved useful

strategic and tactic tool for them to increase their competitiveness.

ICT and Financial Practices Information Technology and communication (ICT)

benefits the business world by allowing organization to work more efficiently

and maximize productivity, faster communication, electronic storage and electric

record are the few popular practices. Since the ubiquity of ICT has increased

across the boundaries it has now become an inevitable domain to incorporate ICT

in all workstations to tackle all the activities in efficient and effective fashion.

Technology is an essential partner in management for business, regardless of

the kind of enterprise you operate. Whether you need computers for

storage, transfers, retrieval or transmission of information, you can manage

your business with greater accuracy and efficiency with the assistance of

information technology and computer applications.

7
The benefits of using ICT are tangible and can be measured;

 Global Financing Information technology allows finance to function on a

global level.

Financial markets can be thought of as the first organized, global information

markets operating through network computers. Without information

technology, financial markets could not react to global development and finance

companies couldn’t consistently acquire information at the same time as

their competitors. For example, the internet allows continuous access to

credit scores and credit rating to all lenders, insurance companies and

businesses that need financially responsible customers.

 Social Media The Information Technology that runs social media on the

internet that provides financial institutions with valuable information on

their customers.

By encouraging online communities associated with their products, finance

companies not only acquire information but also encourage brand loyalty. For

example, websites such as Amazon allows online stock traders to discuss their

picks and advise newcomers. Socially driven information technology allows

8
finance companies to contact the younger demographics that will be in future

customers.

 Storing and Protecting Information Information technology creates

electronic storage system to protect company’s valuable records.

According to Graziadio Business Report, Published by Pepperdine University,

secure maintenance of customer and patients files is vital to business integrity,

storage systems, such as vital vaults, keep information safe by only allowing

certain users within the company to access, withdraw, add or change the

documents and protect from being hacked, or wiped out during a technological

disaster. Electronic security means your valuable records will remain safe.

You may already use computer for data storage for business, inventory, sales,

receivables’ and payable stored in excel, and open office or a similar program

keeps these figure at your fingertips. Accounting software stores your payroll

information, tax records and specialized data for your business.

 Marketing Large and small businesses are on level playing field on the

internet. You can have web presence, take orders, buy merchandise, sell

excess or even operate some business entirely online.

9
A marketing tool that uses information technology is the quick response that

looks like a bar code. We can use your business management skills to direct

employees or contractor to do your internet marketing with the help of

information technology.

 Information The internet is a wealth of information to keep your current

with trends, techniques, software and human resources.

We can draw on online database and websites to locate potential employees,

compare insurance proposals, tackle employee issues or check out the

competition. Managing your business with information gleaned from the internet

keeps knowledge and on the cutting edge.

 Communication Communication by email is faster and costs less than

sending a paper letter by post.

The business communication in various commercial organizations has widely

accepted email as main medium for information dissemination across platforms.

Email systems not only carry out information in textual formats rather provides

the way to transmit multimedia information from customer to client and vice

versa.

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  Benefits to the Business The business benefits arising from effective ICT

generally relate to the reliable and consistent matching of ICT services to

user needs i.e. service quality.

This in turn contribute to the overall success of the organization’s business

through higher productivity. These benefits are achieved through increasing

service availability and quality to users, better match of capacity of requirements,

more efficient handling of problems and reduce risk of failure, minimizing the

effect of such failure.

The Design and planning process within an ICT organization are concerned with

providing overall guidelines for the development and installation of an ICT

infrastructure that satisfies the needs of all aspects of the business and futuristic

scope of ICT as well.

 Time saving: (Transport, Delivery time, Response time) The main time

saving factor is the flexibility of scheduling when to engage on a process.

For example a visa application form can be filled when the applicant has a

free time and not necessary during the opening hours of the consulate.

The data filled are verified immediately for validity. Acknowledge is sent

11
 immediately as prove of application. Payment is made online with credit

card thereby saving the time of passing through the cashier.

 Money Saving: (Transport cost, Material cost, Environment cost) The

application doesn’t need to travel to the consulate two times, first

time for collecting the application form and for physical presentation.

He needs to go to the consulate only once the application form

would have been filled online. The cost for travelling the first time is

saved. Also the potential wastage of paper is removed. Reducing

paper consumption helps improve the quality of environment, reduce

forest destruction since paper is produced from wood and reduce

of waste processing.

 Improved security: (transportation, transactions, trace of activities)

The reduction of the number of transport necessary for

processing a visa contributes to reduction of dangers and

insecurity linked with transport.

For example the reduction of the number of transport will reduce traffic and

thereby reduce the potential of road accident. Also in countries where road

transport constitutes some form of danger by arm robbers, reduction of the

number of transport will also reduce exposure to arm robbery. Online

12
transactions for payment will contribute two types of security- the reduction of

exposure to arm robbery and the reduction of temptation to bribery.

It is in fact a common believe that the arm robbery succeeds since the arm

robbers are sure getting money during their operation since the majority of the

population has no other means but carry raw cash on them when travelling. Also,

since those practicing bribery rely on the direct contact with the client (applicant),

coupled with the absence of trace of their transactions, the fact that the

trace of all transactions is recorded helps dissuade the practice of bribery.

Transactions or payments are made online and acknowledge with prove of

payment. Reference

This became possible when the information and communication technology

transformed from the ordinal system providing static web pages into two-way

system such as E-Commerce, E-Banking and Corporate Internet Banking (CIB).

Developments in the field of Information and communication technology (ICT)

have made inroads in almost all sectors. The impact of technology adoption

particularly in the banking sector has changed the face of the industry. Banking

sector is the backbone of any economy and a healthy denotes a strong and

resilient banking sector. ICT strongly supported growth inclusiveness of the

13
banking sector, thus facilitating an inclusive economic growth. ICT not only

improved the efficiency of the banking by strengthening the back and

administrative process and also front end operations thus bringing down the

transactions costs for customers which has been the major focus of the ICT for

financial Management. Today banks have centralized operations, more and more

banks and branches are moving to core banking solutions, network based

computing and are using ICT for customer relationship management (CRM).

ICT fills the business environment, strengthen the success of Modern

Corporation, provide governance with a well-ordered infrastructure and connect

value to the process of the learning, in the activity and management of modern

organizations. ICT provides an extensive perspective on the nature of

technology, and the impact of information and communication technologies on

the enterprise and on society. ICT in financial management presume one of the

modules. The growth and development of ICT in this area has led to massive

applications. This paper tries and examines how ICT tools and applications are

used with respect to financial management. This article also probes as to how

ICT tools and applications can be used to wider business. The usage of ICT

contributed significantly to the workers performance. Due to increase in the

technology usage in the banking industry, workers performance increases day-by-

14
day. And ICT is becoming an indispensable part of modern day and banking

service. Banking industry is also one of the industries that adopt technology which

helped in providing better services to customers.

Major opportunities offered by Technological developments are:

 Reducing cost per transactions.

 Broadened and easier access to target customers.

 More efficient system and techniques for dealing with information on

customers (CRM).

 Possibility of diversifying into new business.

 More efficient tools for controlling internal processes efficiency.

The first goal is to shift highly standardized low value-added labour intensive

activities towards computerized applications capable of reducing the unite price

of transactions. Research in different countries has demonstration significant cost

structure differences for communications and transaction with increasingly

innovative ICT and e-business channels significantly reducing operational costs.

For example, if the cost of transactions carried out at the counter is valued at a

unit cost of one, this vale halved with phone banking.

15
 KADUNA POLYTECHNIC
COLLEGE OF BUSINESS AND MANAGEMENT STUDIES
SCHOOL OF BUSINESS AND FINANCIAL STUDIES
DEPARTMENT OF ACCOUNTANCY

HND IIA (REGULAR)

COURSE TITLE: FINANCIAL MANAGEMENT II

(COURSE CODE: ACC 423 )

ASSIGNMENT
QUESTION:

16
Effect of Information Communication Technology on Financial Management
practices in relation to: (E-commerce, E-banking, E-business, E-Governance, etc.)
Sub-section A
S/NO NAMES REG. NO. SIGNATURE
1 AYOMIDE AMOS FATUROTI CBMS/20/HND/0076
2 FRANCA ENE ABAH CBMS/20/HND/0382
3 ISHA YUSHA'U YAKUBU CBMS/20/HND/0405
4 COMFORT ALEX AGUWAI CBMS/20/HND/0010
5 IDIRIS IBRAHIM CBMS/20/HND/0255
6 ABUBAKAR ABDULSALAM CBMS/20/HND/0118
7 TAOFIK A. SHOLOLA CBMS/20/HND/0230
8 EMMANUEL MICHAEL OCHOLA CBMS/20/HND/0141
9 EUNICE OMOLARA FADIPE CBMS/20/HND/0555

SUBMITTED TO:
MAL. IBRAHIM YUNUSA
APRIL, 2023
Electronic Commerce

E-Commerce or Electronic Commerce means buying and selling of goods,

products, or services over the internet. E-commerce is also known as electronic

commerce or internet commerce. These services provided online over the

internet network. Transaction of money, funds, and data are also considered as E-

commerce. These business transactions can be done in four ways: Business to

Business (B2B), Business to Customer (B2C), Customer to Customer (C2C),

17
Customer to Business (C2B). The standard definition of E-commerce is a

commercial transaction which happen over the internet. Online stores like

Amazon, Flipkart, Shopify, Myntra, Ebay, Quikr, Olx are examples of E-commerce

websites. By 2020, global retail e-commerce can reach up to $27 Trillion. Let us

learn in detail about what is the advantages and disadvantages of E-commerce

and its types.

Types of E-Commerce Models

Electronic commerce can be classified into four main categories. The basis for this

simple classification is the parties that are involved in the transactions. So the four

basic electronic commerce models are as follows,

1. Business to Business

This is Business to Business transactions. Here the companies are doing business

with each other. The final consumer is not involved. So the online transactions

only involve the manufacturers, wholesalers, retailers etc.

2. Business to Consumer

Business to Consumer. Here the company will sell their goods and/or services

directly to the consumer. The consumer can browse their websites and look at

18
products, pictures, read reviews. Then they place their order and the company

ships the goods directly to them. Popular examples are Amazon, Flipkart, Jabong

etc.

3. Consumer to Consumer

Consumer to consumer, where the consumers are in direct contact with each

other. No company is involved. It helps people sell their personal goods and

assets directly to an interested party. Usually, goods traded are cars, bikes,

electronics etc. OLX, Quikr etc follow this model.

4. Consumer to Business

This is the reverse of B2C, it is a consumer to business. So the consumer provides

a good or some service to the company. Say for example an IT freelancer who

demos and sells his software to a company. This would be a C2B transaction.

E-Governance

E-governance, meaning ‘electronic governance’ is using information and

communication technologies (ICTs) (such as Wide Area Networks, the Internet,

and mobile computing) at various levels of the government and the public sector

and beyond, for the purpose of enhancing governance. The application of ICT to

19
transform the efficiency, effectiveness, transparency and accountability of

exchange of information and transaction:

Between Governments,

Between Government agencies,

Between Government and Citizens, and

Between Government and businesses.

Government Process Re-engineering using IT to simplify and make the

government processes more efficient is critical for transformation to make the

delivery of government services more effective across various government

domains and therefore needs to be implemented by all Ministries/ Departments.

Electronic banking

Electronic banking services are a range of banking and other services or facilities

that use electronic equipment and include:

 online banking

 ATM and debit card services

 phone banking

 SMS banking

20
  electronic alert

 mobile banking

 fund transfer services

 Point of sales banking

 Estatements

Electronic Business

Electronic business (e-business) refers to the use of the Web, Internet, intranets,

extranets or some combination thereof to conduct business. E-business is similar

to e-commerce, but it goes beyond the simple buying and selling of products and

services online. E-business includes a much wider range of businesses processes,

such as supply chain management, electronic order processing and customer

relationship management. E-business processes, therefore, can help companies to

operate more effectively and efficiently.

21
Reference

Al- Faki, M 2006. Transparency and financial risk for capital market development

in Africa: The Nigerian case study. Securities Market Journal, 4, (1), 9- 28.

Cadbury Committee. 1992. Report of the committee on the financial aspects of

corporate governance. London: Gee Publishing.

Cadbury, A. 2002. Overview of banking framework for implementation. The

World Bank Group: Washington. D.C

Central Bank of Nigeria CBN 2006.Electonic banking and Banks in Nigeria Post

Consolidation.

22
Aliyu, & Usman(2020). Banks and Discount Houses in Nigeria. Effective Central

Bank of Nigeria CBN Publication.

23

KADUNA POLYTECHNIC
COLLEGE OF BUSINESS AND MANAGEMENT STUDIES
SCHOOL OF BUSINESS AND FINANCIAL STUDIES
DEPARTMENT OF ACCOUNTANCY

HND IIA (REGULAR)

COURSE TITLE: FINANCIAL MANAGEMENT II

(COURSE CODE: ACC 423 )

ASSIGNMENT

QUESTION
The essentials of financial management information and report.
Economic reality, timing and accuracy.

23
Sub-section B
10 ABDULBASIR AHMED CBMS/20/HND/0348
11 JEREMIAH AWOYI EKOM CBMS/20/HND/0097
12 FATIMA ABUBAKAR CBMS/20/HND/0142
13 MERCY JOSEPH CBMS/20/HND/0204
14 PATIENCE DANIEL CBMS/20/HND/0432
15 ONU FAITH VICTORIA CBMS/20/HND/0422
16 RAMATU MOHAMMED CBMS/20/HND/0264
17 MARYAM ASAKA CBMS/20/HND/0286
18 HARUNA MOHAMMED CBMS/20/HND/0257

SUBMITTED TO:
MAL. IBRAHIM YUNUSA
APRIL, 2023

The essentials of financial management information and reports.

Financial Management is vital for businesses and organisations as it lays the right

pathway to achieve business goals and objectives. Here are some of the reasons

why financial management is essential in a business:

 Helps in Financial Planning

 Assists in acquiring and managing funds

 Helps in funds allocation

 Provides insights to make critical financial decisions

 Cuts down financial costs

24
  Improves profitability and value of the organization

 Makes employees aware of financial savings and investments

 Helps in planning the future growth of the organization

 Helps in achieveing economic stability

Accurate and Reliable Financial Report

They help you determine when to recognize revenues from sales that have been

made, which helps with forecasting future revenues. Financial statements can also

give insight into whether or not revenue has been recorded correctly, which is a

key element for taxation and financial reporting purposes.

Timeliness and Accuracy of Reports?

Timeliness represents the time taken to compile and publish any statistical

indicator, measured from the end of the reporting period. Accuracy may be defined

by the discrepancy between the data compiled and the unknown “true” figure (the

target value).

Accuracy in Financial Reporting

Accuracy is the concept that a stated value in the accounting records fully reflects

all of the supporting facts. When the concept is expanded to the financial

statements, it means that the information in the statements is fully valued and that

all necessary supporting information has been fully disclosed.

25
The Most Essential in Financial Reporting

The most important financial statement for the majority of users is likely to be the

income statement, since it reveals the ability of a business to generate a profit.

Also, the information listed on the income statement is mostly in relatively current

dollars, and so represents a reasonable degree of accuracy.

Importance of Timeliness in Financial Reporting

Timely financial reporting is integral to effective decision making, and is in line

with the core principles of transparency and accountability in government. It also

assists the wider public in its engagement with, and trust in, the public sector.

What ensures accuracy and reliability of financial reporting?

Internal controls are the policies and procedures that a business can take to

safeguard its assets, insure accuracy of financial reporting, and prevent fraud.

Economic reality

The economic reality is a way to determine the nature of a business transaction

by considering the entire set of commercial circumstances. The test also evaluates

whether or not a specific instrument is an investment contract.

Timing

26
placement or occurrence in time. The ability to select the precise moment for

doing something for optimum effect.

Market timing is an investing strategy that involves making assumptions about

what the price of a security will be at a certain time. Market timing can be either

bearish or bullish, and it can be made with short-term or long-term movement in

mind.

Accuracy

The ability of an instrument to measure the accurate value is known as accuracy.

In other words, it is the the closeness of the measured value to a standard or true

value. Accuracy is obtained by taking small readings. The small reading reduces

the error of the calculation. The accuracy of the system is classified into three

types as follows:

1. Point Accuracy

The accuracy of the instrument only at a particular point on its scale is known as

point accuracy. It is important to note that this accuracy does not give any

information about the general accuracy of the instrument.

2. Accuracy as Percentage of Scale Range

27
The uniform scale range determines the accuracy of a measurement. This can be

better understood with the help of the following example:

Consider a thermometer having the scale range up to 500ºC. The thermometer

has an accuracy of ±0.5 percent of scale range i.e. 0.005 x 500 = ± 2.5 ºC.

Therefore, the reading will have a maximum error of ± 2.5 ºC.

3. Accuracy as Percentage of True Value

Such type of accuracy of the instruments is determined by identifying the

measured value regarding their true value. The accuracy of the instruments is

neglected up to ±0.5 percent from the true value.

28
Reference

Aduda, J. (2011).The relationship between executive compensation and firm

performance in the Kenyan banking sector. Journal of Accounting and Taxation,

3(6), 130-139.

Ahmed, N., Zeng, M., Sinha, I., Flavell, R., & Massoumi, R. (2011). An Empirical

Analysis of Remittances, Growth nexus in Pakistan using bounds testing approach,

Academic Journal, 52(2), 187-196.

Ahmed, R. (2010). Nigerian Brewery Sector Brewing growth; malting value. Vetiva

Capital Management Limited Research Publication. Retrieved from

www.vetiva.com.

Amaka, C. P. (2012). The Impact of Internal Control System on the Financial

Management of an Organization. Un-Published Bsc. Science Project, AmorjiNike,

Enugu: Caritas University.

29
 KADUNA POLYTECHNIC
COLLEGE OF BUSINESS AND MANAGEMENT STUDIES
SCHOOL OF BUSINESS AND FINANCIAL STUDIES
DEPARTMENT OF ACCOUNTANCY

HND IIA (REGULAR)

COURSE TITLE: FINANCIAL MANAGEMENT II

(COURSE CODE: ACC 423 )

ASSIGNMENT
QUESTION
Implications of uncertainty for financial reports.
Sub-section C
19 ZAINAB TEMITOPE ABDULRASHEED CBMS/20/HND/0188
20 COMFORT FUNMILAYO OBAYE CBMS/20/HND/0447
21 JENNIFER CHEKWUBE OKAFOR CBMS/20/HND/0536
22 VIVIAN ADEDSHEWA ADEYEMI CBMS/20/HND/0336
23 GRACE TOYOSI OPATOLA CBMS/20/HND/0178
24 GLORIA ARUYA CBMS/20/HND/0155
25 PEACE CHINASA UGWU CBMS/20/HND/0116
26 MURJANATU HARUNA CBMS/20/HND/0573
27 BLESSING LUCY OCHI CBMS/20/HND/0195

SUBMITTED TO:
MAL. IBRAHIM YUNUSA
APRIL, 2023

30
 INTRODUCTION

Financial report

Financial reporting and analysis is the process of collecting and tracking data on a

company’s finances, including its revenues, expenses, profits, capital, and cash

flow. Businesses use them to inform their strategic decisions and stay compliant

with tax regulations.

Meaning of uncertainty

In general, “uncertainty” means a state of limited knowledge

where it is impossible or impracticable to describe exactly

an existing state or a future outcome.

1. Uncertainty exists in financial statements where

measurements “to a large extent are based on estimates,

judgments, and models rather than exact depictions.”

2. As the level of uncertainty increases, challenges may

exist for:

31
financial statement preparers to estimate the future

outcome of the uncertainties inherent in many business

transactions, auditors to verify the subjective judgments

about those uncertainties, and

investors to understand those uncertainties and assess their

potential impact on future earnings or cash flows.

For example, seemingly small changes from a management-

selected input used to determine fair value could have a

material impact on the reported result at any specific date.

For example, when a fair value measure is determined

primarily based on a discounted cash flow analysis, use of a

discount rate that is 100 basis points different could mean

the difference between a material goodwill impairment

charge, or none at all.

This roundtable will bring together investors, preparers, and

auditors to provide input about those measurements (and

32
associated disclosures) where the outcome depends on

future events that by definition are presently unknown.

As the initial step in gathering input on this topic, the

roundtable discussion will focus on:

Measurement and recognition — whether measurements

that involve uncertainty provide investors with useful

information.

Disclosure — the information that investors find important to

understand and assess measurement uncertainties and the

challenges or impediments that preparers face in providing

that information.

Auditability — the auditor's role and responsibility for

reporting on financial statements with measurement

uncertainties.

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Certain recent accounting standards have increased the

extent of measurement uncertainty in financial statements

and some standards have attempted to increase the

transparency into the measurement uncertainty that

underlies financial statement items.

Nonetheless, there continue to be questions about the

recognition and measurement of uncertainty; the

disclosures necessary to understand the measurement

uncertainty; and how uncertainty impacts auditability.

The FASB's Conceptual Framework for Financial Reporting

states, “if the level of uncertainty is sufficiently large, that

estimate will not be particularly useful.”

The nature and extent of measurement uncertainty depend

on the economic phenomena that the underlying financial

statement item is intended to represent. Some question

what is the right balance and whether sufficient information

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is provided to understand the nature and extent of

measurement uncertainty.

To explore this topic, it may be useful to illustrate some of

the various accounting treatments that currently

incorporate uncertainty. For example,

Certain illiquid financial assets reflected at estimated fair

value are adjusted up or down for changes in the estimated

fair value; however, non-financial assets (e.g., goodwill) are

only adjusted down when the recorded amount is greater

than the fair value at a point in time.

Contingent liabilities are recognized when it is probable that

a loss has been incurred and can be reasonably estimated

and are measured as a single point estimate. If the single

point estimate is within a range, the additional maximum

exposure to loss is required to be disclosed.

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Certain guarantees are measured based on probability-

weighted expected future outcomes.

The financial statement effects of uncertain tax positions

are recognized when it is more likely than not, based on the

technical merits, that the positions will be sustained upon

examination and are measured as the largest amount that

has more than a 50% chance of being realized.

Certain illiquid financial assets are measured at present

value based on discounted future cash flows regardless of

the certainty of those cash flows.

Acquired identifiable intangibles are recognized without

regard to measurement uncertainty. However, most

internally developed intangibles (e.g., research and

development and goodwill) are never recognized in the

financial statements because the future benefits are

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deemed to be too uncertain.

When there is substantial doubt about an entity's ability to

continue as a going concern, the financial statements are

generally not adjusted to reflect the uncertainty. Instead,

disclosures are provided and include, among other things,

information about the uncertainty, the recoverability and

classification of recorded asset amounts, and the amounts

or classification of liabilities.

Implications of uncertainty for financial report

In today’s global economy organisations are highly dependent on technology and

thus the IT systems in which they invest can play a significant role in overall

business success. It therefore makes business sense to invest in applications that

will raise the value that they offer to their organisations.

This is particularly true of financial consolidation and reporting applications which

are often implemented as part of an effort to mitigate risk and speed up the

company’s financial close and reporting cycle. Here a fast, reliable financial close

has both external and internal benefits.

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For external stakeholders, swift and high-quality financial reporting is regarded as

an accurate gauge of good governance promoting positive sentiments among

investors. Internally, management will need to ensure business strategies are

producing the expected results as soon as possible. Here a quicker close allows

more time for organisations to analyse and review strategies and revise them if

necessary.

It is therefore safe to say that any weaknesses in the system controls or IT

environment, particularly when it comes to the financial reporting process, hold

significant risk. These risks are inextricably intertwined and what impacts internal

stakeholders will inevitably have an impact on external stakeholders, ultimately

contributing to building or derailing organisational success and reputation.

The following are the implication of uncertainty for financial report

 Inaccurate Financial report;

 Incomplete Financial report; and

 Untimely Financial Information.

One of the biggest risks financial managers face is reporting inaccurate,

incomplete and untimely financial information. This is particularly true of large

and/or listed entities with a decentralised structure where the group will more

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often than not appoint a team to consolidate all of the subsidiaries’ financial

information into one standard monthly financial pack.

This was the case with a leading roads construction and materials specialist

requiring the monthly financial reporting consolidation of 52 entities within the

group. Prior to implementing a financial consolidation solution, their

consolidation team of two people were tasked to consolidate all of the financial

information captured on spreadsheets across the group into one standard

financial pack.

Here are various weaknesses and their related risks soon became evident.

HUMAN ERROR

First and foremost, not only was the consolidation process time consuming but

also riddled with inaccuracies. Owing to their very nature spreadsheets are

susceptible to human error resulting in an undesirable situation where multiple

versions of the truth exist. Today’s competitive global market place requires that

large and/or listed entities become increasingly agile and without access to

accurate and timely information it is virtually impossible to make informed

organisational decisions – a risk I’m sure most organisations wish to mitigate.

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DISTRIBUTION AND STANDARDISATION

Closely linked to this is the issue of distribution. In the case of the specialist road

construction company discussed above, its decentralised structure meant that

nearly all of its subsidiaries were running different ERP or source systems. In

today’s business environment where mergers and acquisitions are commonplace,

management more often than not adopt an efficiency and cost-saving rationale.

Instead of replacing or interfering with the existing ERP or source systems they

opt to work with what they have invested in as an organisation.

Once again in this scenario ensuring the right people receive the right information

in time, in the right format, to ensure the right decisions, becomes a daily

challenge. Here the value of a financial consolidation solution that can

supplement the existing ERP or source system can prove invaluable. Certain niche

financial consolidation solutions have functionality that allows for the

standardisation of reporting information outside of the source system. This can

lead to huge productivity, IT and infrastructure, time and cost saving benefits.

SECURITY AND REAL-TIME MONITORING

Another common bug bear for financial managers is that of security. With teams

of people having access to and inputting various data into multiple spreadsheets,

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there is little to no control over what management and staff have access to along

the audit trail.

Not only is this a risk from a strategic point of view as leaked company

information does not do much to instil investor confidence, but it yet again

increases the likelihood of inaccuracies and inconsistencies creeping in. Different

staff inputting different information at different times once again increases the

likelihood of a “multiple versions of the truth” scenario where under pressure

decision-makers will be unnecessarily challenged to determine which version is

the latest.

A financial consolidation solution that has a simple to use “lock down” or access

control function can ensure that once information has been locked in the system.

It is the sole representation of that information on the system and can only be

accessed or changed again through a system administrator. This functionality also

enhances monitoring as managers are empowered to track which reports are

complete or still in progress, thereby increasing overall efficiency and accuracy.

SEEING THE BIGGER PICTURE

The bottom line is that inaccuracies, inconsistencies, delays, as well as security

and distribution issues in the financial reporting process, come at a price. Taking

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time to weigh up the inherent risks associated with a manual, outdated or

decentralised financial reporting process may well not only save your organisation

time and money from a material and reputational perspective, but may well

prevent the risk of your organisation digging itself into an early financial reporting

grave.

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