To err is human, but some public companies are testing the limits of forgiveness. According to a new analysis from Ideagen Audit Analytics, the number of U.S. public companies with accounting errors so serious that they needed to withdraw their financial statements reached a nine-year high last year. All told, some 140 U.S. public companies had to withdraw and reissue their financials due to serious errors that were caught after the fact. The findings underscore some serious challenges confronting corporate finance departments as we make our way through 2025.
While much of the news coverage of this phenomenon has focused on failings in the audit function, the deeper issue is the increasingly complex web of intertwined details multinational companies are now managing across their tax, finance, legal and risk and compliance functions. There was once a time when the corporate tax function could afford to operate happily in its own little corner of the business, tracking payables and receivables, and diligently reporting on a quarterly basis. Now, the tax department is at the center of a regulatory, technological and professional revolution that has teams tracking more variables than ever before—many of them in real-time—while projecting new risks and protecting against current ones, often with smaller staffs and shrinking budgets.
The Complexity Economy
Today’s corporate finance, tax, risk and legal professionals are in a high-stakes environment where commerce and compliance are inextricably linked. Take a typical M&A transaction for example. With global M&A volumes projected to jump 15% this year, reaching a total of $3.45 trillion, acquisitions are sure to be a fixture in the corporate tax, finance, risk and legal playbook in 2025. Many companies will quickly find, however, that the work that goes into vetting, onboarding and reporting these deals has gotten considerably more complex in recent years.
Beyond the basics of complementary business structures and alignment around strategic customers, companies considering an M&A transaction must now also factor countless risks and regulatory exposures into the equation, incorporating everything from geopolitical volatility to environmental, social and governance (ESG) concerns. In fact, according to Deloitte’s 2024 ESG in M&A Trends Survey some 72% of M&A transactions were abandoned over the last two years due to ESG concerns alone.
Add to those concerns the growth of e-invoicing and real-time, transaction-level tax reporting, which now require companies in many jurisdictions around the world to report taxes in real-time at the point-of-sale, country-by-country tax reporting requirements being implemented in line with the Organization for Economic Co-operation and Development’s (OECD) BEPS Pillar 2 initiative and countless pending regulations focused on sustainability reporting, and the plot thickens further. Did I mention the new administration in the U.S., which is sure to introduce a new batch of variables to incorporate into the mix?
Harmonizing Disparate Corporate Functions
With all of these moving parts affecting all aspects of every move a modern company makes, there is a fair amount of inconsistency and confusion out there when it comes to who’s responsible for coalescing everything and developing a clear path forward. Is it the CEO? Chief Financial Officer? Chief Operations Officer? Chief Risk Officer? Chief Legal Officer? Chief Tax Officer? Increasingly, the corporate responsibility possession arrow is pointing to all of them. The fact is, each department plays a critical role in achieving business success, but they must be able to work in concert to achieve business goals without ending up on the wrong side of the countless risks they face.
That brings us back to all the errors showing up in public company financial statements. Those errors are not the root problem; they are symptoms of a much larger set of challenges affecting all companies right now. To address them, businesses need to start breaking down silos that have historically kept individual business functions separate. The interconnected nature of risk and compliance issues, spanning multiple functions, operations and processes requires companies to be able to share data, analytics, expertise and insights in ways they have previously never done. And it needs to happen yesterday.
The Next Move
Of course, making this pivot is easier said than done. Breaking down antiquated structures requires a huge operational change that affects everything from the C-suite to individual departments to frontline employees. While these problems seemingly exist in their own vacuums, they’re all interconnected, and businesses need to realign their data, systems and processes to address this new normal.
Only by having a fully integrated, 360-degree view of their businesses can businesses adequately anticipate and confront the volatility that awaits them in 2025 and beyond.
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