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Torgomyan

UNIT IV

ROLE OF INFORMATION TECHNOLOGY IN FINANCIAL REPORTING AND MANAGEMENT

Discussion Topics
Getting Started

1. What are the key advantages of IT in the sphere of financial management? Brainstorm
your ideas and add them to the following ones.
a. Accuracy
b. Speed
c. Performance
2. Which technologies can benefit the finance function? Here are some technologies to assist it.
Read them through and discuss in your group.
a. Cloud
b. Cyber
c. Social media
d. Analytics
e. Robotic process automation (RPA)
f. Artificial Intelligence (AI)

Discuss the responsibilities of CFOs – Chief Financial Officers

Warm up

Terms
Ex. A Check the meaning of the following terms.

Human resources Trends Advent Productivity Cumbersome

Accuracy Redundant work Wastage Costly Attainable
Key decisions Capacity Workflow Innovation stakeholder

Ex. B Match the words with their meanings.

1. It is something exceeding what is necessary or normal such as a job.

2. It is mainly commanding a high price especially because of intrinsic worth.
3. It is a party that has an interest in a company and can either affect or be affected by the business.
4. It is the degree to which the result of a measurement, calculation, or specification conforms to the
correct value or a standard.
5. It is a progression of steps (tasks, events, interactions) that comprises a work process, involves
two or more persons, and creates or adds value to the organization's activities.
6. The amount or proportion of something that is wasted or lost by deterioration.
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7. It is the division of a business that is charged with finding, screening, recruiting, and training job
applicants, as well as administering employee-benefit programs.
8. It means a decision which has a significant effect on any sphere it functions within.
9. Specific ability of an entity (person or organization) or resource, measured in quantity and level
of quality, over an extended period.
10. It is a general direction into which something is changing, developing, or veering toward.
11. It is something that is difficult to deal with or handle because of its size or weight.
12. Able to be accomplished, achieved, or obtained.
13. The process of translating an idea or invention into a good or service that creates value or for
which customers will pay.
14. An important event, invention, or situation is the fact of it starting or coming into existence.
15. A measure of the efficiency of a person, machine, factory, system, etc., in converting inputs into
useful outputs.

Reading

Information technology has continued to play an important role in the growth of the business industry in
the 21st century. The advent of computers, IT and the Internet has changed the way businesses operate.
From HR (Human Resources) to marketing and financial management, everywhere the role of IT has
grown. Use of IT means adding speed, efficiency, and convenience to these functions. These three are
important factors that can help improve productivity. IT trends have also shown that the world of
technology will continue to grow. Businesses are using every form of technology to grow their sales and
revenue. Finance is an important and a bit complex function that cannot be run efficiently without the use
of IT.
Every finance manager is expected to have a sound knowledge of Information technology and a nice level
of IT skills. Finance has traditionally been a complex function that has boggled minds. Chances of errors
have always remained high in financial management. Its role is central to business and most businesses
take the function very seriously. Finance is a risky business and errors in this area can ruin all the efforts
made by the staff through an entire year. IT can be a very important support for the finance staff.
Financial management and reporting should be free from errors. For a long time the world was dependent
on financial managers and hand written accounts for storing and publishing financial data. This made the
task cumbersome and things have changed with the development of IT. The internet has brought the
biggest change in this area. It has made storing, sharing and publishing of financial data easier. IT has
also reduced the costs of financial management.
With less staff more can be achieved and accuracy is always higher. Accuracy is a key requirement in
financial management and helps reduce the need for redundant work or wastage of time. The world of
finance is fraught with risks and every small error can prove costly. Moreover, accounting managers are
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always under pressure related to ethics and performance. IT improves performance and can process larger
amounts of financial data within less time. So, finance managers stand to gain a lot from IT.
Exchange of financial data and information between various functions is easier with the use of
Information Technology. Sales and marketing functions need support from finance department. They
need actionable financial data to make key decisions. Important sales and marketing decisions are based
upon financial information and data. The finance function plays a critical role in this area and supports
these functions with important financial information that helps them plan and create effective marketing
programs. Effective financial management helps with so many things because finance supports every
other function. Internet’s role in financial reporting has grown. Apart from online exchange of financial
data, online information systems have also helped the finance function. There are several online tools and
financial software that help finance managers to understand data and analyze trends. Information
Technology has eased so many pressures on finance managers and reduced their tension. The need for
accuracy and ethical pressures has always been a major burden for finance managers. With increased use
of IT tools and software, both these burdens have eased. It is right that IT has given rise to some
disadvantages but it has also balanced some forces. Automation was feared to affect employment but the
increase in capacity offered by it is a great factor. Today’s financial analysts are equipped with best in
class technology that enables the analysis of loads of data with ease. IT reduces this probability and helps
handle large loads of data with efficiency and relieves finance managers and companies from the most
cumbersome task. Financial and statistical tools are a major support in case of data analysis. Accurate
financial information is a key necessity for the executives since they have to make important decisions
within seconds. Shared management information systems enable the sharing of data between the various
departments as well as a faster workflow. Several companies share their financial information publicly
online from their websites. Balance sheets and pro forma statements get ready within minutes and are
published and shared with stakeholders with ease.
Small and big companies alike need to use IT tools for financial analysis. In the small companies, the load
of finance department may be lower and yet the benefit of using IT can be immense. Information
technology has helped companies bring in transparency and efficiency both. The most important effect is
on quality of financial services. Financial reporting is not only better and quicker but also the task burden
is greatly reduced. The banking sector was caught in a chasm for ages. IT added speed and efficiency to
this sector. IT saw a swift jump with increased reach and better performance. Banking and finance sector
have grown very fast in the past decade. It has brought growth in the financial world and helped it in
several spheres. Data processing, quality of reporting and marketing in the banking world, all has grown
very fast with the arrival of the internet.

Reading exercises
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Ex. A Choose the best option to answer the questions based on the reading article.
1. What should a modern finance manager have?
a. knowledge of IT
b. knowledge of management
c. managerial skills
2. What has made storing and publishing of financial data easier?
a. computer store rooms
b. new computer software
c. the Internet
3. What has changed the way businesses operate now?
a. the advent of computers
b. the advent of computers, IT and the Internet
c. the advent of IT
4. What was the reason for the fear that could affect employment?
a. new computer programs
b. new financial trends
c. automation
5. Which functions really need support from finance department?
a. sales and marketing
b. sales
c. accounting department
6. How do companies share their financial information online?
a. from their websites
b. through social media
c. through messengers
Ex. B Decide if the following statements are true or false according to the reading article.

1. IT usage has added speed, effectiveness and convenience.

2. Businesses use every type of technology to increase their sales and revenue.
3. Chances of error are rather low in financial management.
4. IT has not made storing, sharing and publishing of financial data easy.
5. IT has given rise to some disadvantages in the meantime balancing some forces.
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Ex. C In the following text 5 sentences have been removed. Below the extract you will find 5
removed sentences. Choose from the sentences (A-E) the one which fits each gap (1-5).
Digital technology is revolutionizing the way successful businesses operate. 1 C
For finance functions too, it presents a significant opportunity. Technology can enhance the performance
of traditional activities, and help finance teams provide more powerful support to operational business
units.
But getting the most from technology is not necessarily easy. 2___A__
The impact on the organization, particularly on existing roles and future talent needs, must also be
understood. 3 _D___
CFOs that use analytics to combine finance data with other datasets will understand market trends better
and be well placed to play a more strategic role.
RPA, which is software that can be easily programmed to perform basic tasks across applications, can be
used to manage an increasing amount of the day-to-day work in finance. 4 __E___
While RPA is relatively well established, AI (Artificial Intelligence) is only just beginning to be
incorporated into finance function technologies. 5 __B__
RPA and AI technologies are complementary and can be implemented together or individually.
A. Any investment needs to support organizational and finance objectives and has to be backed up
by a clear business case.
B. AI involves developing computer systems able to perform tasks that normally require human
intelligence, such as visual perception, speech recognition and decision-making.
C. It is opening new channels to market, creating additional ways to connect with customers, and
enabling new opportunities for accessing, processing and interpreting data.
D. So how can CFOs get to grips with the technological opportunities open to them and maximize
their chances of successful implementation?
E. It can therefore free up finance staff to perform more value-added activities.

Ex. D Look at the statements below and the descriptions of organizations, software and IT below.
Which description of the text (A, B or C) does each statement 1-6 refer to? For each statement 1-6,
mark one letter (A, B or C).

1. You have good knowledge in the sphere of business and industry.A

2. An auditor can encounter some errors while doing the audit.B
3. You work as an IT auditor and you need some documentation reviews.C
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4. If you need contemporary financial information and audit results of the previous years.A
5. As an auditor, you work by planning audit reports and gather some audit evidences.C
6. IT auditor deals with risks, especially inherent ones.B

Text A

An IT audit can be defined as any audit that encompasses review and evaluation of automated information
processing systems, related non-automated processes and the interfaces among them. Planning the IT audit
involves two major steps. The first step is to gather information and do some planning the second step is to
gain an understanding of the existing internal control structure. More and more organizations are moving to
a risk-based audit approach which is used to assess risk and helps an IT auditor make the decision as to
whether to perform compliance testing or substantive testing. In a risk-based approach, IT auditors are
relying on internal and operational controls as well as the knowledge of the company or the business. In the
“Gathering Information” step the IT auditor needs to identify five items:
 Knowledge of business and industry
 Prior year’s audit results
 Recent financial information
 Regulatory statutes
 Inherent risk assessments

Text B

A side note on “Inherent risks,” is to define it as the risk that an error exists that could be material or
significant when combined with other errors encountered during the audit, assuming there are no
related compensating controls. As an example, complex database updates are more likely to be
miswritten than simple ones, and thumb drives are more likely to be stolen (misappropriated) than
blade servers in a server cabinet. Inherent risks exist independent of the audit and can occur because
of the nature of the business. In the “Gain an Understanding of the Existing Internal Control
Structure” step, the IT auditor needs to identify five other areas/items:

 Control environment

 Control procedures

 Detection risk assessment

 Control risk assessment

 Equate total risk

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Text C
So what’s included in the audit documentation and what does the IT auditor need to do once their
audit is finished. Here’s the laundry list of what should be included in your audit documentation:
 Planning and preparation of the audit scope and objectives
 Description and/or walkthroughs on the scoped audit area
 Audit program
 Audit steps performed and audit evidence gathered
 Whether services of other auditors and experts were used and their contributions
 Audit findings, conclusions and recommendations

 Audit documentation relation with document identification and dates (your cross-reference
of evidence to audit step)

 A copy of the report issued as a result of the audit work

 Evidence of audit supervisory review

Information on Modern Financial Software

Financial software and systems are developed to help you make sense of your valuable money. They can
help you keep a record of how much you have, how much you owe, how much you save, how you spend,
and how to spend your money differently in the future. These financial systems software best tracks your
expenses and account balances, allowing you to focus on other important stuff related to money
management.
Most of these financial software systems work on the premise that better money management comes
through visibility and centralization. You will be better equipped to make smart decisions and stay within
your budget if you can easily see all your accounts and spending habits at one place.
5 Best Financial Software Systems
1. PDF element for Business
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This tool lets you transform scanned PDFs into fully editable, searchable documents, and selectable, with
OCR recognizing text and images in more than 20 languages. PDFs can be converted into editable Word,
Excel, and PowerPoint files in no time.
You can set passwords and encrypt confidential documents and add custom stamps to signal
confidentiality.
2. Deskera
Deskera is a financial software system available for deployment in the cloud or on premise. Key features
include sales and billing management, purchase management, and customizable financial reports.
Users create cash purchases, goods receipts, debit notes, purchase orders, and they can make payments
with Deskera’s purchase management module.
With Deskera’s accounting functionalities, users can record financial transactions with customers,
vendors and other companies. Mobile apps are available for Android OS and iOS.
3. Intacct
With a broad set of functionalities for small to midsized businesses, Intacct is Web-based financial
software and systems accounting software. Intacct can support applications for purchasing, core
accounting, time and expenses, revenue management, project accounting, order and billing, multi-
currency management, global consolidations, and financial reporting.
4. ECOUNT Only Office
ECOUNT is cloud-based integrated financial systems software for small and midsize businesses. This
tool handles tasks such as manage inventory, logistics, production, sales, billing, accounting and payroll
efficiently. Software customization is available on needs basis and workflow of users’ businesses.
The software is used by huge amount of companies in manufacturing, trading, billing, distribution, retail,
and service industries globally.
5. Global Shop Solutions
Global Shop Solution provides real-time inventory accuracy, improves timely delivery, and helps lower
administrative costs. It also aims to enhance customer service by increasing sales and profitability.
This financial systems software is built directly into the system, so if a particular application feature is not
available, users can just create one to suit their required specifications.

Financial software exercises

Ex. A Find expressions from paragraphs of the financial software that mean the following.

1. The programs and other operating information used by a computer.

2. Process of generating an invoice to recover sales price from the customer.
3. Having or showing a quick-witted intelligence.
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4. Methodical procedure of introducing an activity, process, program, or system to all applicable

areas of an organization.
5. It is the cost of operations that a company incurs to generate revenue.
6. It is a commercial source document that is issued by a business’ purchasing department when
placing an order with its vendors or suppliers.
7. It is like spending a lot of money right after you get paid—like taking your family out to dinner
every payday.
8. It is the financial results of an organization that are released for its stakeholders and the public.
9. It is the combination of assets, liabilities, and other financial items of two or more entities into
one.
10. It is an estimation of revenue and expenses over a specified future period of time and is usually
compiled and re-evaluated on a periodic basis.
11. It is a document used by a vendor to inform the buyer of current debt obligations, or a document
created by a buyer when returning goods received on credit.
12. It represents a complete list of items such as property, goods in stock, or the contents of a
building.
13. It is the overall process of managing the way resources are obtained, stored, and moved to the
locations where they are required.
14. This means doing end to end accounting works starting from the transaction accounting till
finalization of accounts.

Ex. B Match the two parts of the expressions according to the information on financial software.

1. financial C A. accuracy
2. valuable I B. stamps
3. account G C. software
4. smart L D. notes
5. inventory A E. industry
6. service E F. documents
7. editable J G. balance
8. custom B H. orders
9. goods M I. money
10. global O J. files
11. debit D K. accounting
12. core K L. decisions
13. confidential F M. receipts
14. spending N N. habits
15. purchase H O. consolidation

Vocabulary exercises

Ex. A Choose the best word that suits the collocation based on the reading article.

1. Due to the spread of Covid-19 around the world, __B___ resources of any company suffered
from a hectic job they did to keep the companies run smoothly.
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a. material b. human c. natural

2. Business ___A___ suffered great losses due to strikes around the continent.
a. industry b. service c. angel
3. Company head has regular meetings with __A___ staff every month to check their work and
listen to the issues encountered.
a. finance b. material c. illegal
4. She never does any type of ___C__ work whatever the circumstances connected with finances.
a. authorized b. recognized c. redundant
5. The company can use a wide variety of online __B___ either free of charge or paying a small
lump of money.
a. computers b. tools c. framework
6. Google Classroom in one of the best in __C___ technologies to be used while teaching online.
a. auditorium b. world c. class
7. Every accountant or auditor has to handle ___B__ of data if they want to be successful in the
records and reporting.
a. loads b. manyc. abundant
8. We should do a thorough __B__ analysis to be able to make reliable and forward-looking
business decisions.
a. datum b. data c. statistic
9. A company is considered healthy if it maintains a strong _C___ sheet.
a. spread b. off balance c. balance

Ex. B Find synonyms (16 in total) in the following word cloud based on the words from this unit.

Ex. C Use the same word from the box (there are extra words) for each group to make new
compound combination.

Risky innovation workflow innovative trends analysis staff benefit data programming
software stakeholder accuracy
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1. Risky business Risky operations Risky enterprise

2. market trends accelerating trends follow trends
3. Analysis problems financial analysis full-time analysis(staff
4. obtain data data analysis data collection
5. complete benefit degree of benefit factual benefit(accuracy
6. commercial programming antivirus programming enterprise programming
7. technical innovation innovation process stifle innovation
8. emerging technology innovative technology leading edge technology

Ex. D Search the words in this puzzled crossword.

https://thewordsearch.com/puzzle/1365991/

How to Write Proposals

Writing

A proposal is written for a superior (e.g. a boss or college principal) or a peer group (e.g. club members or
colleagues). You should make one or more suggestions which you support with some factual information
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to persuade the reader about the actions done. A proposal should be clearly structured and it is possible to
include headings.
Proposals can be structured the same way as reports and be organized under headings. You should make
polite recommendations and suggestions and use a wide range of persuasive language.
At first, you should gather information. Business proposals can differ from each other based on industry,
company type and size and other factors. There are some basic steps to do in your business proposal:
1. Information about the company your work for or set up: What are your credentials, who you
are in the industry and why should a customer choose you but not your rival companies?
2. Show your awareness of the issues: Demonstrate that you know and have done a previous and
thorough research, so that you are aware of the client’s needs.
3. Pricing and methodology: What are your solutions for the client’s issues and what costs will it
incur?
Step 1: Title page
Include here information like company’s name, logo, client’s name and contact information, the date and
a title.
Step 2: A cover letter
Include information about your organization, brief background information, a short overview why your
company is better than the others.
Step 3: Table of contents
If your proposal is not very brief, include a table of contents. It will assist the reader in knowing what to
expect in the proposal.
Step 4: Executive summary
It sets the tone for the proposal – why you send it, and why should the client like to read it? Include the
ties of your company’s offers to your client’s problems.
Step 5: Proposal
This section shows the solution you are offering. You should describe the expected outcome of the project
and its phases. Let the client know that you are the most suitable for the job.
Step 6: Methodology/Services
This section is a general overview of the solution your company has prepared for the potential client.
Expect what questions will be addressed and take your client through the process. Describe what
deliverables they can expect and when to expect them.

Writing assignment
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You work at one of the best IT companies in

the country and you were to write a proposal to the company dealing with cyber security on the following
topic: Issues with cyber-crime and how it can be prevented.

You should write your proposal in no more than 250 words.

Key Terms

Human resources The personnel of a business or organization, regarded as a significant asset

in terms of skills and abilities.
Business An organization or enterprising entity engaged in commercial, industrial,
or professional activities.
Trends A general direction in which something is developing or changing.
Financial management It means planning, organizing, directing and controlling the financial
activities of the enterprise.
Advent The arrival of a notable person or thing.
Improve To enhance in value or quality: to make better.
Productivity The effectiveness of productive effort, especially in industry, as measured
in terms of the rate of output per unit of input.
Complex Consisting of many different and connected parts.
A sound knowledge A thorough awareness.
To boggle minds To thoroughly overwhelm, confuse, or surprise one.
Risky business A situation or activity that involves the possibility of being hurt.
Finance staff They are responsible for accounting and for various forms of revenue and
expenses for a company.
Cumbersome large or heavy and therefore difficult to carry or use
Accuracy The degree to which the result of a measurement, calculation, or
specification conforms to the correct value or a standard.
Redundant work An exceeding work.
To be fraught To be full of unpleasant things such as problems or dangers.
Costly Costing a lot; expensive.
Capacity the total amount that can be contained or produced
Loads the quantity that can be carried at one time by specified means
Data sharing The ability to share the same data resource with multiple applications or
users.
Innovation The process of translating an idea or invention into a good or service that
creates value or for which customers will pay.
Balance sheet It is a financial statement that reports a company's assets, liabilities and
shareholders' equity at a specific point in time.
Pro forma statement Projected or estimated financial statement that attempts to present a
reasonably accurate idea of what a firm's financial situation would be if the
present trends continue or certain assumptions hold true.
Stakeholder It is a party that has an interest in a company and can either affect or be
affected by the business.
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Immense Extremely large or great, especially in scale or degree.

In a chasm of ages a profound difference between ages
A swift jump A quick move in a specified way.
Account balances It is the amount of money present in a financial repository, such as a
savings or checking account, at any given moment.
Visibility The state of being able to see or be seen.
Convert Change the form, character, or function of something.
Billing The process of preparing or sending invoices.
Goods receipt Official document issued by a port, shed, a warehouse or shipping terminal
operator to acknowledge receipt of items listed in it under customary or
specified terms and conditions.
Debit notes It is a commercial document issued by a buyer to a seller as a means of
formally requesting a credit note.
Purchase orders A buyer-generated document that authorizes a purchase transaction.
Functionality The range of operations that can be run on a computer or other electronic
system.
Consolidation The action or process of making something stronger or more solid.
Cloud-based Stored, managed, and processed on a network of remote servers hosted on
the Internet, rather than on local servers or personal computers.
Payroll A list of a company's employees and the amount of money they are to be
paid.
Manufacturing It is the production of products for use or sale, using labor and machines,
tools, and chemical or biological processing or formulation.
Timely delivery Done or occurring sufficiently early; prompt sending of something.
Specification An act of identifying something precisely or of stating a precise
requirement.
Invoice A list of goods sent or services provided, with a statement of the sum due
for these; a bill.