Challenges of Online Financial Reporting
Despite the benefits the Internet confers on publicly listed companies who utilizes it as a medium for reporting there are several challenges they will encounter from its use as a reporting medium. These included cost, expertise, technology and the management paradigm.
Developmental costs of websites, storage costs and the costs to maintain a website for some firms may outweigh the benefits, preventing them from using the Internet as a medium for financial disclosure. The challenge for firms reporting online is keeping these costs at a minimum.
Websites require persons, who are trained to build, maintain and write programs for the website to run on. Currently a number of firms do not have the human resource equipped with the expertise to operate the website, these firms may have to train current workers, hire new staff or outsource the website to other competitive companies; all of which are incremental costs to the firm.
Many companies have had difficulty posting their financial reports because of a lack of infrastructure. Computers such as high-end web serves may be too expensive for these firms. An added cost comes with having to acquire firewalls and antivirus software to secure and protect the system and its network. Programs that the company would use to present and store financial information may also be too expensive.
Management maybe unwilling to commit to a change in organizational culture of which traditional means of financial reporting is an integral part.
Authentication of Information
A major challenge is the degree of information reliability that online reporting provides since the authenticity of any information presented via the Internet is a significant problem for investors who rely heavily on this information.
Standardization of the Presentation of Information
The lack of standards for financial reporting online poses a challenge for the development of reporting on the Internet in terms of financial information online in a PDF format because many users may not have the necessary programs with which to read the financial statements. Firms would therefore need to use a format that would be the most accessible to financial information users.
Timeliness of Information
In our investigation we discovered many firms who do not update the information on a timely basis. Information that is disclosed online needs to be done on par with when it is presented to shareholders via traditional means; this is to facilitate efficiency of the market.