Gone are the days when accountants only performed transactional duties. Today, accountants do much more than just manage balance sheets. Accounting firms do not look for traditional accountants that can perform specific roles. In the contemporary era, accounting firms in India look for chartered accountants that offer diverse services. Accountants also help a company move toward their business goals. Companies rely on accountants for several internal processes. For example, companies rely on accounting firms for risk management. Since companies are looking to enhance internal control, risk management is a must. Read on to know the significance of risk management for accounting firms.
Role of risk management in accounting
The basic responsibility of accountants is to maintain financial records/documents. However, they also help companies make better business decisions with the use of financial data. Regular accountants might focus on daily transactions and sheets. It usually happens with in-house accountants hired by a company. Accounting firms have expert professionals that can work in managerial positions. Such accountants can help in implementing and monitoring risk management policies.
Accounting firms help companies understand the capability of their current risk management program. If there are any shortcomings, an accounting firm can help mitigate them. With risk management, a company can make business decisions that take them forward. Any risk associated with the accounting practices within a company can be identified proactively. Some functions of accounting firms associated with risk management are as follows:
- Identifying key opportunities and challenges for a company
- Focusing on management accounting
- Identifying new competencies
- Focusing on internal reporting and control
- Focusing on strategic management and leadership
- Boosting business acumen
Types of risks managed by accounting firms in 2022
Since there are several types of accounting risks, in-house employees are of no use. Companies need skilled individuals to develop a risk management culture. Apart from their clients, accounting firms also have to deal with their own risks. If accounting firms want to maintain business continuity, they need to mitigate risks quickly. Risks experienced by accounting firms in India are as follows:
- Accounting firms have access to the financial data/records of their clients. The clients trust the accounting firm and don’t want their financial data to get into the wrong hands. Data breaches are among the biggest risks for accounting firms. If an accounting firm loses client data, it can even land into legal trouble.
- There are several standards for accounting practices in India. If an accounting firm fails to follow the standard, it might be penalised. For the same reason, accounting firms have compliance experts to know the federal rules and regulations.
- Reputational risks are also dangerous for accounting firms. If the previous clients of an accounting firm have gone bankrupt, the firm might not have a good reputation in the industry. Also, frequent data breaches and lawsuits can malign the reputation of an accounting firm.
Accounting firms boost their reputation by helping their clients mitigate risks. However, an accounting firm also needs to look for risks within its firm to maintain business continuity.
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