Investments in the financial reporting process

Maria Khrakovsky and Nemit Shroff

Chapter 2 in Handbook on the Financial Reporting Environment, 2025, pp 15-34 from Edward Elgar Publishing

Abstract: Three of the primary outcomes of a firm's financial reporting process are: 1) the production of financial reports; 2) the reduction of fraud, manipulation, and errors in financial reports; and 3) the collection of financial information that can also inform managers’ internal decision-making processes. This chapter provides insights into investments firms make in the financial reporting process, including investments in information technology systems, internal control systems, external assurance, and accounting human capital, among others, which can help firms achieve all three outcomes. While such investments may not be of the highest priority for early-stage companies due to costs and the absence of regulatory requirements, these investments can benefit firms greatly by improving operational efficiency and performance, attracting external capital, and setting a foundation of accountability and trust with stakeholders both inside and outside of the firm. Lastly, we discuss and highlight emerging and unanswered academic research questions in this area.

Keywords: Financial reporting; Investments; Internal controls; Internal decision-making; Sarbanes-Oxley Act; SOX; Fraud (search for similar items in EconPapers)
Date: 2025
ISBN: 9781800888678
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