Question

Research and discuss the topics of data analysis and data visualization as it relates to the accounting profession. How do they impact and enhance financial statement analysis? Research and discuss the topic of Sustainability and Corporate Social Responsibility. How can this reported information affect or enhance financial statement analysis. Should this type of reporting be required? Why or why not?

Answer 1

As we are progressing, accounting profession has become more and more data driven. Data analysis and data visualization helps to arrive at more meaningful results quickly.

Ratio analysis is the traditional way of financial statement analysis. There are four types of ratios: liquidity, operational efficiency, and profitability. Trend analysis helps in forecasting.

There are many tools for data analysis such as advanced spreadsheet models to determine key factors of a business success. Quantitative models and decision making models helps to solve complex problems. Models can be reworked to include risk and uncertainity. Prediction models try to predict the effect of judgement by the manager. Data analytics can also help to uncover fraud by use of Benford's law. Benford’s Law says that in any list of financial transactions the number one should occur 30.1% of the time and each successive number less than that all the way down to the number nine occurring just under 5% of the time.

Data Visualisation is pictorial representation of data to arrive at quick results. Standard charts like bar-graphs, pie-charts are commonly used but now we have infographics, dials and gauges, geographic maps, sparklines, heat maps, and detailed bar, pie and fever charts including interactive capabilities, enabling users to modify data for querying and analysis.

Sustainability and Corporate Social Responsibility costs are required to be incurred depending on the laws of the land. These information should be reported as every cost componet should be presented in financial statement. Initially, it may seem as just a cost center but it creates goodwill for the company whose benefits come to show later. Usually a company incurs such costs when madated reporting such costs is also mandated as per the law of the country.