Your company's social media usage may seem like one of the last issues that influences your internal controls over financial reporting. But websites like Facebook and Twitter, which started as online networks for people to connect with one another, have evolved into legitimate publishing platforms for businesses. Social media channels now represent some of the fastest and most reliable ways to communicate with the public. Most organizations have created branded profiles to broadcast information to their followers and engage them.
Things get tricky when it comes to sharing news via social media, however, especially when it relates to financial information. For years, the U.S. Securities and Exchange Commission (SEC) has enforced Regulation Fair Disclosure rules, which require publicly traded companies to disclose information that would be deemed relevant for investors in nondiscriminatory ways.
In the past, most organizations have relied on tools such as press releases to share quarterly financial reports. But as social media outlets play more prominent roles in publishing news, it's important to maintain a firm grasp of your internal controls over financial reporting. You may be inadvertently violating regulations on what seems like a routine or harmless click of a button.
In 2013, the SEC updated Regulation Fair Disclosure to stipulate that businesses can broadcast financial information on social media channels, but only if investors are notified prior to publication and understand that's where they need to go to retrieve the information. This means chief financial officers (CFOs) and managers have new responsibilities to regulate their financial reporting standards.
It's important to establish companywide guidelines and train employees on how to use these tools in accordance with federal regulations. The 2014 Internal Audit Capabilities and Needs Survey from global consulting firm Protiviti found that 74 percent of companies surveyed use social media for external communication, yet only 55 percent of those organizations have developed internal social media strategies.
Your business has a lot at stake posting information on social media platforms. CFOs and managers who are unaware of the nuances associated with financial reporting standards and online communication may be putting their entire companies at risk of lawsuits and noncompliance penalties.
One way you can avoid compliance issues is to assess whether social media is the most effective channel for your audience. Some financial reports require a significant level of context and supplementary information, meaning a 140-character post on Twitter may not be useful to investors.
That's not to say social media channels can't serve as effective gateways to that information. For example, Compliance Week reported the SEC will not take issue with Twitter posts that include hyperlinks to additional information. It's just important to understand the details of the regulations ahead of time.
What has your organization done to internally regulate the use of social media for financial reporting purposes? Leave a comment below.