In the new accounting environment, the firm’s databases and ERP systems will play the same role the general ledger did in the old manual reporting world, with the difference being that the reporting system will require a monitoring and control layer, probably including a continuous assurance component, which will evolve from the systems being implemented for Sarbanes/Oxley 404 certification. It is likely that firms will progressively implement such monitoring layers for their own internal management purposes, the output of which could then be adapted for external reporting. Indeed, this would have the advantage of letting the market assess the adequacy of the firm’s control systems. On the other hand, it can be argued that the reporting system will depend on the IT decisions of individual firms and so it is not clear what would compel a firm to implement the particular monitoring layer that is desired by users. In other words, the more sophisticated the infrastructure underlying the reporting system, the more difficult it will be to obtain cross sectional consistency, at least in the absence of regulation, which is unlikely in this context. This fact may constrain how extreme the new reporting systems can be, given their reliance on technology.
