Accounting on the Internet: Providing Web Assurance
Accountants are not the dull and boring bean counters that are often portrayed in the movies. Although, I have met a few who fit that popular stereotype most accountants are vital and innovative business people. There is a great diversity of specialization within the accounting profession and listing them all is not within the scope of this article. Accounting is not just a profession of numbers, it is a profession that helps people and organizations shape their future. This is the first in a series of articles addressing how the Internet is changing the accounting profession and how accountants deliver value added service to their clients, employers and society.
When you buy stock in a publicly traded company, how do you know you are buying an investment instead of getting scammed? For example, a computer company reports that it has $2 million of inventory, can you be sure that inventory is really worth $2 million? If the inventory is 386 laptops valued at a cost of $1200 per unit, then the company is overstating their net worth.
The stock market crash of 1929 lead Congress to establish the 1933 Securities Act and the 1934 Securities and Exchange Act. Both pieces of legislation require companies that sell stock to issue financial statements and have those statements examined by an independent public accountant. There are about 15,000 publicly traded companies in the United States today that are required to have an annual audit performed by Independent Certified Public Accountants (CPAs).
Prior to the 1933 you could not be sure of any investments. Today if you flip through the annual report of any US corporation you will find the “Independent Auditor’s Report”. The report issued by CPAs states that the company has complied with Generally Accepted Accounting Principles (GAAP) in preparing their financial statements. It provides reasonable assurance that the financial statements are free of any significant misrepresentations as well as establishes some consistency in financial reporting between corporations.
Purchasing stocks as well as researching a company’s financial history can all be accomplished on-line. Traditionally annual reports have been distributed in hard copy and mailed to investors, potential investors, creditors, brokers and analysts. Now most businesses have their annual reports and other interim financial statements published on the corporate web site. Through the Internet a corporation can release financial information faster and to a broader audience than ever before.
The American Institute of Certified Public Accountants (AICPA), the national professional organization of practicing CPAs, has been the leader in the development of Generally Accepted Accounting Principles. The AICPA, www.aicpa.org, is now taking steps to provide assurance to the public accessing on-line financial information as well as consumer purchases with the CPA WebTrust program. Accountants have experience making investors more confident in the stock market and can do the same by providing on-line assurance services. The goal of the CPA WebTrust program is to provide the public with safe and secure Internet commerce.
Web-site businesses that meet AICPA-defined criteria for standard business practices and controls are issued a CPA WebTrust Seal of assurance. These web sites will display the CPA WebTrust seal that can be clicked through to view the results of the CPA’s examination. Only public accounting firms and practitioners, who are specifically licensed by the AICPA, can provide assurance services to evaluate and test whether a particular Web site meets the CPA WebTrust standards.
Some of the CPA WebTrust principles are:
- Disclosure of business practices such as return policies, warranties and order processing as they relate to electronic commerce.
- The company maintains effective controls to provide reasonable assurance that customer orders are completed and billed as agreed. Controls such as transaction identification, validation, completeness and timeliness of order processing.
- Protection of customer information.
For a more complete description of the CPA WebTrust principles and criteria go to www.aicpa.org.
According to the AICPA, new web businesses that carry the CPA WebTrust seal will have added credibility they might not otherwise have from their customers’ viewpoint. Also, large companies with recognizable brand names can benefit from the privacy and security features CPA WebTrust offers. Providing web assurance services will strengthen the public’s confidence in e-commerce and help make the Internet a limitless business frontier.