Technology has pervaded our lives in ways we can’t even imagine. Right from searching for information, making work productive, to making purchase decisions, a lot of aspects in our life is governed by technology. This has led to a rise in the number of technology companies. Tech companies are plenty, and so is the competition. With technology advancing at a mind-blowing pace, it is finally time to move away from gut instinct to predictive analytics when it comes to making business decisions.
The composition of this industry is very different than that of most others; due to the brisk pace of innovation there is an unusually extensive investment in research and development required. As a result, the industry’s workforce consists of a much larger proportion of engineers and other highly-skilled technical workers, relative to other industries, especially since product creation requires creativity, expertise, and precision. The technology industry also employs a relatively large workgroup engaged in sales and promotion, as the success of a new or improved products depends heavily upon consumers being aware of, and interested in, the item.
The technology industry creates quite a challenge for businesses; success depends on innovation and can go as quickly as it comes. Companies can risk their entire credibility on data breaches so it is important for them to build secure networks and develop solid risk management plans. No matter which direction an organization may choose, technology will play a starring role in the story. Technology alone cannot solve all the world’s problems, but it can accelerate solutions for those with the right vision. The technology industry may face future headwinds around ethical concerns or regulatory maneuvering, but there is no doubt that those hoping to make difference can use technology to unlock the potential they imagine.
How can PSC help?
We at PSC help businesses to optimize social listening opportunities and understanding purchase patterns so that the businesses can garner contextual information about their customers, and use that information to create personalized offers, better retention strategies and out-predict competitors.
Data Analytics:
The discussion about technology, digital platforms, and data analytics in audits to use of software that gives practitioners the ability to analyze complete datasets in ways that were not possible in the past. Armed with information generated by the software, we can more effectively perform risk assessments, design more appropriate procedures, and investigate anomalies that might have gone undetected if the audit relied on sampling rather than a full analysis.
Therefore, we are also using data analytics to gain an understanding of the flowof data through a client's system, enabling more effective and precise audit planning.
IT Start-ups:
As technology start-ups prepare for their first audits, it’s common to see a number of accounting issues that can potentially increase the time and cost required to complete the audit successfully.
Some of the Accounting Issues for Technology Companies:
- Non-Cash Equity Activity - Technology firms are often unsure how to account for transactions such as the beneficial conversion features on convertible notes, warrants, and stock options.
- Revenue Recognition - Startups often lack a policy for recording revenue properly, or there’s inconsistency with different team members recording similar transactions differently. In these situations, the accounting will need to be adjusted to complete the audit successfully.
- Intercompany Accounts - Intercompany accounts are often not reconciled, so the auditors may request that a company unwind historic transactions to determine if intercompany balances are appropriate and in line with intercompany cost-plus agreements in place. If a startup has an international entity, such as an offshore development subsidiary, the company needs to be sure any foreign currency translations or remeasurements are calculated properly.
- Software Development Costs - Many companies mistakenly expense the costs associated with software development to payroll, but there are fairly complicated rules dictating whether or not you’re allowed to expense those costs or whether you need to capitalize a portion of those costs.
While most of these start-up challenges can be resolved fairly easily, a consultation with your external auditor as you’re setting up systems, developing accounting policies, and creating the financial infrastructure before a financing round or potential transaction can save time and money while helping you achieve your business goals sooner.
System Audit:
The data and information generated in companies today are endless. The information that is processed within a company is incalculable. Companies, increasingly, need technology to work, requiring complex software and computerized equipment to develop their activity in an optimized and efficient manner. That prevailing presence of software and technology cause the need for systems auditing. The main objective of systems auditing is to validate the integrity of the information and data stored in the databases of the information systems and their processing. It is one of the types of audits that go beyond the economic factor.
We at PSC conduct systems audit which involves:
- Verification of controls in the processing of information and installation of systems, in order to evaluate their effectiveness and also present some recommendation and advice.
- Verify and judge the information objectively.
- Examination and evaluation of the processes in terms of computerization and data processing. In addition, the number of resources invested, the profitability of each process and its effectiveness and efficiency are evaluated.
Therefore, the audit of systems is fundamental to guarantee the performance and security of the computer systems of a company, which are reliable when using them and guarantee the maximum possible privacy.
If any of these scenarios sound familiar, don’t hesitate to reach out. Our technology accounting experts have helped hundreds of technology companies navigate similar situations, and we look forward to assisting you.