4th Global Business Research Congress (GBRC - 2018), Vol.7-p.

256-259 Kaya, Akbulut

BIG DATA ANALYTICS IN FINANCIAL REPORTING AND ACCOUNTING

DOI: 10.17261/Pressacademia.2018.892
PAP- V.7-2018(45)-p.256-259

Idil Kaya1, Destan Halit Akbulut2

1Galatasaray University, Istanbul, Turkey.
[email protected], ORCID: 0000-0002-9171-5989
2
Galatasaray University, Istanbul, Turkey.
[email protected], ORCID: 0000-0002-0705-9553

To cite this document

Kaya, I., Akbulut, D. H. (2018). Big data analytics in financial reporting and accounting. PressAcademia Procedia (PAP), V.7, p.256-259.
Permanent link to this document: http://doi.org/10.17261/Pressacademia.2018.892
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ABSTRACT
Purpose- This paper aims to discuss the impact of big data analytics on financial reporting and accounting within the institutional
framework.
Methodology- The paper’s design is a qualitative study based on in-depth interviews with accounting professionals in different industries
to determine and analyze potential uses and impacts of big data analytics in financial reporting and accounting.
Findings- The nature of accounting and financial reporting do not alter but traditional methods of recording, collecting and analyzing
accounting information change. The revenue recognition in many industries including airways and telecommunication companies needs to
process a large volume of data because of the complex billing systems. Furthermore, the big data and analytics present a pressing issue and
in the same time a real opportunity for accountants working in forensic and valuation areas.
Conclusion- We concluded that the companies are tracking the policies and procedures of BDA adopted by other firms in trying to assure
the legitimacy of their firm and to maintain and enhance their competitive advantages. In addition, financial reporting and accounting
professionals try to adapt to the challenges regarding using and mastering new technologies and applications, they need to improve their
capabilities and skills in the areas of big data analytics.
Keywords: Big data, big data analytics, financial accounting, reporting.
JEL Codes: M40, M41, M42

1. INTRODUCTION
The developments in the information and communication technologies allow that datasets become more accessible. New types of data
arise such as real-time contents and the big data analytics (BDA) help to solve issues between users and preparers of financial reporting
and accounting. The purpose of the present paper is to discuss the impact of BDA on financial accounting and reporting. We conducted a
qualitative study based on in-depth interviews with accounting academics and professionals in different industries to determine and
analyze potential uses and impacts of big data analytics in financial reporting and accounting with institutional theory as our primary
theoretical framework. One can say that BDA and financial accounting have common features; the interactions between them could have
significant results in the businesses. On the one hand, BDA is described in the literature as a science and technology about examining,
summarizing and drawing conclusions from data. Sun et al. (2018) defined BDA as the process of collecting, organizing, and analyzing big
data to discover, visualize and display patterns, knowledge, and intelligence as well as other information within the big data. On the other
hand, financial accounting is an information system of recording, storing, retrieving, summarizing, analyzing and presenting the financial
and economics transactions and events. Consequently, we can argue that the accounting information systems extended with BDA can be
an impetus on the management success. This paper proceeds as follows. First, we consider the institutional theory as a framework. Second,
we explore the results of the literature review. Third, we present the research method and methodology. Fourth, we illustrate the findings
of the in-depth interviews, and we conclude.

2. THEORETICAL FRAMEWORK
We study the use of BDA in financial accounting and reporting by drawing upon Institutional theory, which has been developed within the
academic management literature and widely used in accounting studies. It provides an understanding of how organizations understand and
respond to changing social and institutional pressures and expectations. We use the isomorphism dimension and the decoupling dimension
of Institutional Theory in explaining compliance with the complex accounting standards and the need for BDA.
DiMaggio and Powell (1983) specify three different isomorphic processes. These are the coercive, mimetic and normative isomorphism. We
study the use of BDA in accounting in these three different isomorphic processes. Firstly, according to the coercive isomorphism, the
companies will only change their institutional practices because of pressure from the stakeholders upon whom the organization is
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DOI: 10.17261/Pressacademia.2018.892 256 PressAcademia Procedia
4th Global Business Research Congress (GBRC - 2018), Vol.7-p.256-259 Kaya, Akbulut

dependent. The company is coerced into adopting the existing use of data gathering and analyses to bring these into line with the
expectations and demands of its influential stakeholders (use of BDA with the pressures of computing accurate measures in accounting).
Secondly, the mimetic isomorphism involves companies searching for imitate information technology practices of other companies for
competitive advantages. Because of the coercive pressures from the regulatory bodies, investors and software providers in augmenting the
accuracy of its accounts there would be pressure to imitate the use of BDA. Thirdly, regarding normative isomorphism, there are the
professional expectations and the forces of using BDA in determining the appropriate measurement and timing of recognition of different
elements of revenue, in computing accounting estimates and in measuring the fair value of assets and liabilities. The American Accounting
Association(AAA)’s annual meetings named “Accounting IS Big Data” conferences offer to its panels on the accounting function of the
future, how to prepare it and ever-changing Big Data Ecosystem- Blockchain, Cyber, AI, Tax and Integrated Reporting. The AAA also
promotes Big Data education providing teaching materials.
On the other hand, the Institutional theory argues that organizations adopt formal structures and procedures, but actual practices can be
very different from these formally and publicly pronounced processes and practices. The gap between formal and informal structures or
methods is defined as a decoupling. The actual use of BDA can be decoupled from the apparent (institutional) practices. According to
Coyne et al. (2018), Big Data has become more and more meaningful to the accounting, but accountants have little understanding of the
steps necessary to convert Big Data into useful information. This creates a deficiency on behalf of accountants assisting in Big Data
information governance. Palem (2014) argue that many companies appreciate that they need BDA, but they do not know precisely what
they need it for. In most cases, BDA Solution providers bridge the gap between the customers ’needs and Big Data requirements.

3. LITERATURE REVIEW
There is developing literature that illustrates challenges of big data in financial reporting and accounting. This recent literature also
identifies the broad problem areas of financial accounting and reporting in the age of big data. Many researchers study how big data
technologies and big data analytics help to solve issues between users and preparers of financial reporting and accounting since the
datasets become more accessible and new types of data arise such as real-time contents (Al-Htaybat and Al-Htaybat, 2017; Krahel and
Titera, 2015; Bhimani and Willcocks, 2014; Sun et al., 2018; Coyne et al., 2018; Griffin and Wright, 2015). Sun et al. (2018) noted that BDA
uses data mining to uncover knowledge from a data warehouse or a big dataset to support decision making creating predictive models to
forecast future opportunities and threads, and analyzing and optimizing business processes. Hence, the big data analytics offer a capability
of capturing "sequential causational and correlational processes" on a real-time basis and may change the financial accounting dramatically
and reporting that is legacy-based, relied on structured data and successive layers of summary and aggregation and reports on a periodic
basis (Griffin and Wright, 2015). Warren et al. 2015 assert that big data could significantly influence the future of financial reporting and
the evolution of generally accepted accounting principles specifically on the reporting of off-balance sheet assets and fair value accounting.
Coyne et al. (2018) analyze the role of accountants in the age of big data. According to these authors, accountants should play a significant
role in Big Data information governance since they have a keen ability to identify the informational and control needs of internal and
external decision-makers. On the other side, Palem (2014) argued that many companies have become aware that they need big data, but
they do not understand truly what they need for it. BDA solution providers somehow handle the gap between the company’s perceived
need for BDA and its level of comprehension about its scope and come up with a solution. These arguments lead to the following research
questions:
Q1. What is the role of the institutional pressures on the change of the Accounting Information Systems in the age of BDA?
Q2. Does BDA augment the accuracy in fair value of assets and liabilities and how?
Q3. What is the role of BDA in key accounting and audit matters, such as revenue recognition and complex accounting estimates?
Q4. Can BDA provide improved financial reports’ transparency and their usefulness for decision-making?

4. RESEARCH METHOD AND METHODOLOGY

The current study is a qualitative field based on in-depth interviews with accounting professionals in different industries to determine and
analyze potential uses and impacts of big data analytics in financial reporting and accounting through the participants’ perceptions. We
entered into the field study with institutional theory as our primary theoretical framework. We collected the data via in-depth interviews.
The first cycle of data collection realized in April 2018, which comprised semi-structured interviews with the first 8 of participants. The
second cycle of data collection commenced in May 2018 and ended at the beginning of June 2018. This second cycle of data collection
served to enlarge, develop and validate the findings that were developed as part of the first cycle, and additional interviewees will be
included in the study. We also realized a survey based on corporate financial reports. These second data from the corporate reports and
audit reports provide different comprehension and serve to triangulate the evaluation of collected data.
We grouped the 8 participants in three different categories. The points we notice while categorizing of our participants are their job
position, work experience, and certificate. Accordingly, participant 1, 2, 3, 4, 5 and 6 are in the first category with their work experience for
more than 13 years. Participant 7, 8, 9, 10 and 11 take part in the second category with their work experience between 5 and 8 years. In
our third category, there are two participants with only 2 years of work experience. Table 1 presents the participants work experience,
their certificates and their familiarity with the software and ERP.

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DOI: 10.17261/Pressacademia.2018.892 257 PressAcademia Procedia
4th Global Business Research Congress (GBRC - 2018), Vol.7-p.256-259 Kaya, Akbulut

Table 1: Characteristics of the Participants

Work Software and ERP Systems used by
Participant Job Position Certificate
Experience participants
CRMA, CFE, Certified
Consultant in a Big4 Audit Advanced Koach, Master
1 38 years Excel
Firm Degree, Certified
Accountant
2 Professor 37 years Certified Accountant Excel
3 Professor 26 years Certified Accountant Excel
4 SAP consultant 20 years Computer Engineer SAP, Excel
5 CFO 15 years CMA, CIA, CFE, CRMA Excel
6 Expert in Borsa Istanbul 13 years Excel
Reporting Chef at Cargo
7 8 years Master Excel, SAP
Department
8 Internal auditor 7 years Excel, SAP
9 Financial Controller 6 years CMA, CPA SAP, QlikView, Qlik-Sense, Excel
10 Accountant 5 years CPA PARES, DWH
11 Accountant 5 years SAP
12 Accountant 3 years SAP
13 Accountant 2 years SAP

We used an institutional lens to discuss whether companies tend to adopt similar policies and procedures in BDA as those adopted by
other firms and whether they try to assure the legitimacy of their firm and to maintain and enhance their competitive advantages. We also
critically assessed how participants perceive BDA and its impact on the accuracy of annual accounts.

5. RESULTS AND INTERPRETATIONS

We find similar results with the literature that big data and development of technology is likely to lead to some changes in financial
reporting and accounting. In the age of BDA, the nature of accounting and financial reporting are the same but traditional methods of
recording, collecting and analyzing accounting information change. Our qualitative study based on in-depth interviews with accounting
academics and professionals lead the following findings:
- There are too many changes in information and communication technologies, and the accountants must keep pace with the associated
changes, complexities, costs, and risks of adopting them. For example, revenue recognition in many industries including airways and
telecommunication companies needs to process a large volume of data because of the complex billing systems. Besides the overall
management of the availability of the information, the usability in decision-making, its integrity, quality and security, the presentation of
this information on the annual financial reports exposes a big challenge for the accountants. Furthermore, big data and analytics present a
pressing issue and in the same time a real opportunity for accountants working in forensic and valuation areas.
- There are many opportunities to link the traditional extended data, as found in ERP’s, to new sources of data. Extended ERP systems
augment the utility of the accounting records with BDA on assets conditions, features, and characteristics. Processing the big nontraditional
data from various sources has a positive effect on the accuracy of financial reports.
- BDA Solution providers have an essential role in the implementation of BDA; typically they understand the company needs and come up
with a solution.
- Institutional pressures sometimes have key position on the investment decisions to information technologies. Several companies are
tracking the policies and procedures of BDA adopted by other firms in trying to assure the legitimacy of their firm and to maintain and
enhance their competitive advantages.
- The accounting academics and professionals try to adapt to the challenges of BDA in terms of using and mastering new technologies and
applications. They have become aware that they need to improve their capabilities and skills in the areas of big data analytics.

6. CONCLUSION
Grounded on the literature review on Big Data Analytics in accounting and financial reporting, we formulated our research questions on
the extent and the effects of the use of BDA in accounting. We explored the institutional pressures on the adoption and implementation of
BDA and its place in key accounting and audit matters, such as revenue recognition and accounting estimates.
As a conclusion, beside the critical role of service providers of Big Data, there are also institutional pressures on the companies to prepare
in ever-changing Big Data Ecosystem- Blockchain, Cyber, AI, Tax and Integrated Reporting. Additionally, several companies are searching to
imitate information technology practices of other companies for competitive advantages, and the actual use of BDA can be decoupled from
the apparent practices.

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DOI: 10.17261/Pressacademia.2018.892 258 PressAcademia Procedia
4th Global Business Research Congress (GBRC - 2018), Vol.7-p.256-259 Kaya, Akbulut

Acknowledgment
This work has been realized with the support of Galatasaray University Scientific Research Fund. [grant number 18.102.003].

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DOI: 10.17261/Pressacademia.2018.892 259 PressAcademia Procedia