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A Digital Delivery System with Trust Built in: The Need for a Secure Repository for Private Company

We live in an age where information is more plentiful and accessible than it’s ever been, thanks to the rise of the cloud and digital technology. Some might suggest the unprecedented availability of information makes the classic role of the trusted business advisor obsolete – if you have access to a mobile phone or computer, who needs an intermediary when the facts are right at your fingertips?

The reality is data overload makes it more vital than ever for lenders, investors and business decision makers to have readily available, credible information from a trusted source. In the digital era, this is more of a rare commodity than it should be, particularly when it comes to private company financial information.

On the public company side, U.S. shareholders and lenders have the Securities & Exchange Commission’s EDGAR system, which makes financial information – including audited financial statements – available in an online, digital format. However, there is no regulatory clearinghouse for private companies. Banks and other stakeholders are increasingly relying on verifiable data that can be accessed digitally through centralized sites to help speed lending and investment decisions.

Where do accountants fit into this equation? CPAs are, according to business decision-makers, the most trusted financial professionals. In that role, they’ve long played a prominent part in producing financial statements and other critical documentation for their private business clients.

Traditional delivery methods for CPA-produced documents in this area can be problematic since, in the absence of a central repository, they typically rely on email, courier or other methods susceptible to fraud or error. Portals are a better method, but aren’t set up to smoothly transmit information to third-party users in a way that eases liability concerns. And portals still require a CPA firm to administer the site and ensure proper privacy and security protections.

Because of these limitations, banks and lenders have gravitated toward third-party sources such as IRS tax filing databases because they are viewed as validated information. Convenience and timeliness are key factors as lending decisions become more compressed, with the fintech industry seeking to tap the most accessible and comprehensive data sources. The risk for CPAs: the private company documents they produce, such as audit reports, may become less sought-after if they are not readily available in digital format.

These considerations led CPA.com, the technology subsidiary of the American Institute of CPAs, and Confirmation.com to jointly develop RIVIO Clearinghouse, a secure, online hub for private company financial information. RIVIO stands for Repository of Intelligent, Validated Inputs and Outputs, and it creates a rational workflow of documents that protects the interests of all parties that use it: CPAs, lenders, shareholders and the companies themselves. Here’s how:

  • It protects the public interest by ensuring that CPA-reviewed information is presented to authorized users without alteration by company management, reducing the risk of fraud or inaccurately presented data

  • It protects CPA firms in three ways, 1) ensuring that fraudsters can’t easily misuse a firm’s name or letterhead to present manipulated data; 2) eliminating liability issues that can arise when financial information is shared with someone who isn’t a direct client, and 3) ensuring CPAs remain a key resource in the increasingly automated, digitized decision-making process for banks and investors

  • It gives banks and lenders timely data from a validated, trusted source, a critical component in the loan approval process

  • And finally, it gives private companies a secure channel that allows them maximum control and flexibility over which authorized users can view their sensitive financial information

RIVIO ensures that CPA firms aren’t in direct connection with end users of their financial statements that a client authorizes, a critical component of privity of contract defenses. But the automated system also includes protections for the firm if it ever withdraws its report. Unlike current practice, where management is responsible for notifying users of that information, RIVIO tracks and notifies any authorized recipient about the report’s withdrawal.

As the audit evolves to reflect changes in technology, it’s vital that delivery methods for this kind of critical documentation keep pace. RIVIO provides a digital platform for the secure delivery of financial statements and an array of other CPA-reviewed reports, and it can create a competitive advantage for practitioners and their private company clients. You can learn more about RIVIO at rivio.com.