The Internet as a Practical Tool

By Lynford E. Graham and Clinton F. White

The CPA Journal published an article on the use of the Internet by accountants in April 1995 ("CPAs on the Information Superhighway," p.18). That article covered some of the basics of costs and connectivity and possible applications using Internet resources. This article extends those discussions and focuses on the potential for local and regional firms and for accountants no longer in public practice to use these resources. Application suggestions are spelled out in more detail, and Internet addresses for many potential applications are provided in the text. In addition, some recommendations and cautions are provided for first-time venturers to assist in their realization of the business potential of the Internet.

The CPA's knowledge is used to create information from disorganized data. The accountant organizes, classifies, and presents data so that investors, creditors, and others can make decisions based on that information. The Internet contains little "knowledge," but much data, and that data (e.g., security prices, interest rates, census data, annual reports) can be an important input to meeting client needs.

There is little accounting related data on the Internet that is not available in some other form in libraries, or from online or CD-ROM information services by subscription or fee. Business research libraries at major research universities are a wonderful source of current and historical statistical data. The allure of the Internet seems to be that information can be delivered directly at the CPA's desk; and near and dear to all accountants' hearts‹it is generally "free."

Exhibits 1 and 2 contain general information on the Internet, including hardware and software requirements as well as an explanation of Internet addresses.

Accounting, Auditing, and Tax Service Applications

Market Quotations. In the development of financial information or the performance of many attest services, accountants and auditors generally refer to a variety of outside information resources. For example, accountants may be pricing a portfolio of securities in meeting professional requirements concerning financial statement presentation. In other cases, such information is used in a valuation or peer company analysis process during a merger and acquisition engagement. Free market quotes of securities, including one-to three-year price and volume data, are available on the Internet through‹

http://www.quote.com or http://pawws.secapl.com/

As with many Internet resources, alternative commercial sources may provide equivalent information for a fee. While the free information may be very accurate, commercial services may still be considered for critical data since, along with their fee, they may take some responsibility for the accuracy and timeliness of the information presented.

SEC Information‹EDGAR. Preparers and auditors of financial statements are often confronted with the need to check financial statement footnote wordings and presentations against precedent to define "acceptable practice." The acceptability of SEC filings are particularly sensitive to established precedent. If the accountant's reference needs exceed the capacity of commonly available resources, such as the AICPA's Accounting Trends and Techniques, there is a free Internet resource of thousands of SEC filings at your fingertips: the Internet EDGAR dissemination project, available at‹

http://www.sec.gov

This resource provides online access to all publicly available SEC filings beginning with 1994. You can browse all recent filings, or, by citing the company name or ticker symbol, you can select from a menu of recent filings which you may browse or download to your computer. Needs for older filings require consultation with a commercial resource or public information outlet like the SEC itself. Nevertheless, that leaves one significant problem--how do you identify the reports and segments of these reports you wish to see? Many of the SEC 10-K documents are several hundred pages in length. Here the "free" part mixes with harsh reality. There is currently no online key word search capability in the Internet EDGAR system.

Here you may need to resort to what we call "teaming technologies" to make the most of the "free" information. A number of online services (e.g., SEC Online, Disclosure, the AICPA's National Automated Accounting Research System) have excellent search facilities, but at an expensive per-hour rate (or per subscription for some of the CD-ROM products) for the very occasional user. A strategy could be to first perform your search using the powerful online search tool. Once you have narrowed your search to a few reports, you can decide whether to download the information from the service or switch over and receive the report from the "free" source. While the "value added" by many vendors of commercial services for this purpose often more than offsets the higher labor and other convenience costs of the "free" information, usage will dictate the economics. Purchasers of CD-ROM systems already have the reports as part of the service, but the reports may not be the most current, and the timely EDGAR filings may then provide up-to-the-minute updates of the latest filings of interest. A particularly value-packed CD-ROM alternative with an easy-to-use, but powerful search engine with the ability to search the database by report segment (balance sheet, income statement, footnotes, auditor's report, etc.) is the AICPA's CD NAARS subscription, which covers over 4,000 reports per year for around $1,000.

Other Data Sources. Accountants may refer to statistical data to establish market interest rates for pension or EPS calculations or foreign currency exchange rates for translations and transactions. Additionally, census data and economic indicator data is sometimes useful for, say, hospital feasibility studies and consulting engagements. There is a wide variety of government statistical data available on the Internet. Some useful addresses are included in Exhibit 3.

A virtual treasure trove of data for investors or investment advisors can be found at‹http://networth.galt.com

This gives access to Morningstar's database of 5,000 mutual funds, weekly economic reports, stock quotes, bonds and interest rates (including certain derivatives), other government economic data, and the home pages of public companies on the Internet.

Serious economic researchers will find a variety of useful databases on the Internet. While data placed by the government on the Internet is less subject to whimsical change (e.g., "magical" appearance and disappearance) than privately placed information, you will still need to keep current on the availability of new sources of information. One resource to consult is part of an evolving project to communicate the Internet offerings called the government information locator (GIL) service through the Library of Congress:

telnet://marvel.loc.gov

use the log-in "marvel," follow the Federal Government Information path, and be prepared to receive a file in ASCII or a word-processing format).

Auditors that work frequently with the public sector may wish to access FinanceNet for issues related to government financial systems, standards, and general ledgers. An e-mail to‹

listproc@financenet.gov

with the key word SUBSCRIBE in the message area will net you a list of the resources available (no subject or other text in the e-mail is necessary).

Firms wishing to keep informed on issues that may be relevant to the public and their specific client's interest may wish to visit the FASB's Financial Accounting Standards Advisory Committee location to keep abreast of current topics and issues that may warrant closer attention.

To do this use the Rutgers Accounting Web‹"RAW" at‹

http://www.rutgers.edu/Accounting/raw.htm/

or the University of Southern California gopher at‹

cwis.usc.edu

and select the FASB menu.

CPA Firms

The large CPA firms or their affiliates have established a presence on the Internet. News about the firms, technical publications, articles, and surveys as well as service information and contact individuals are available through the various home pages. An early unique offering of Ernst & Young LLP is a question-and-answer request form for income tax, customs, and excise issues: http://www.worldserver.pipex.com/ernsty/

The strategic consulting services unit of KPMG Peat Marwick LLP has created an interesting "virtual office" site where you can browse for information about the firm and its consulting services using icons familiar to an office setting:

http://hp.rad.kpmg.com/www/SSC/home.html

Not only the "giants" have established a presence on the Internet. Smaller firms can stand shoulder-to-shoulder with the big boys in the electronic marketplace. For example, visit‹

http://www.aescon.com/misc/

pester/index.htm

How the Internet will be used to market firm services, increase awareness of the profession, and potentially shape its future image is still a matter of conjecture. Early signs are that the Internet may be a low-cost way to advertise, and may lower barriers to accessing professionals serving certain markets by providing an electronic introduction to them, as well as information on firm services.

Tax Information

For the tax practitioner, the IRS is only a connection away with Internet access. General information, a presentation by the commissioner, news updates, and forms and instructions are available online. To access and transfer the forms, you will need a sophisticated access tool like Acrobat Reader that sometimes accompanies the Mosaic or Netscape browsers that will process the image documents for you. Also, watch for the effective dates on the materials, as updating the "free" resource may not always be the priority at the Treasury Department. The IRS is at‹

http://www.ustreas.gov/treasury/

bureau/irs/irs.html

Pending bills in Congress can be read at‹

http://rs9.loc.gov/home/thomas.html

Technical Point

Because of the nature of the Internet, most valuable Internet resources have multiple points of access, particularly when the resource is considered valuable. You may find that one or two helpful gophers or Web sites will provide you access to many useful information resources. For example, the World Wide Web (WWW) has the objective of linking every document on the Internet, regardless of media type, in a seamless information space. The Rutgers Accounting Web (RAW) is an accumulation point for many different accounting-related references such as EDGAR, American Accounting Association materials, the AICPA report Improving Business Reporting‹A Customer Focus (the "Jenkins Committee" report), Accounting Change Commission issues, educational resources and course materials, syllabi, etc. (also job opportunities, new journal announcements, conferences, a tax issues locator, and newsletter). By visiting RAW, you can have rapid access to many of the resources you need without separately targeting each address individually. Additional materials are being added all the time in response to needs and demand. For a list of the accounting information resources available, send an e-mail message with the key word SUBSCRIBE to‹

anet@scu.edu.au

(no subject or text is necessary).

General Practice Issues

E-mail. Perhaps the most valuable electronic accounting practice linkage that can be made today is an e-mail connection. With the ability to send a message to a colleague and also transfer a client file between client sites or send it back to the office, e-mail can save wasted trips and time. "Telephone tag" wastes time, and many simple requests for information or checking on schedules, etc., does not require a social interaction. One of the hidden benefits of e-mail is that the discipline of composing an intelligible message generally cuts down on the rambling, chatty nature of many conversations. Some businesses today are even encouraging the use of electronic "connections" instead of the telephone to improve efficiency and productivity.

Large businesses can more easily consider significant front-end investments in private e-mail systems as well as tools such as Lotus Notes to meet their communication needs. These tools can be customized to meet firm needs and provide forums for technical discussions, policy dissemination, access to newswire services, and gateway connections to the wider Internet resources. For those with more modest budgets, the Internet can provide the underlying transfer mechanism for moving messages and files. Commercial services (e.g., America Online) or local Internet service providers all have some sort of e-mail capability, and generally allow messages from individuals not even subscribing to their service to reach your mailbox through an Internet connection. But watch out here, often private e-mail and commercial systems allow files to be freely transferred between subscribers, but some systems allow only "screened" text to be received from the Internet, as a security measure against viruses and security breaches.

Costs. Don't think the Internet is "free." Universities may pay upwards of $30,000 per year for access and more for extras like space on a Web server or a dedicated T1 line. As a "toe-in-the-water" measure, a small practitioner may choose to set up several professionals on a commercial service for a monthly fee that is less than $10 per subscriber. Included in that subscription is often a free trial period, access to various news sources and magazines, e-mail, and a few business databases. CompuServe offers both an extended business-oriented package for a few dollars more per month as well as a selection of optional business database resources on an as-needed basis. The offerings of the various commercial services are expanding all the time, and before venturing forth, it may be worthwhile to review an up-to-date comparison of features and costs, evaluated from the perspective of business use.

Professional Societies. Professional societies will have a presence on the Internet. The Oklahoma CPA Society recently came online with a newsletter and service listing--

http://www.icon.net/

commercial/account/index.html

as did the Washington Accountants Network, to facilitate dialog and distribute information and files‹

http://www.eskimo.com/~earl/

The AICPA has established its Accountant's Forum on CompuServe and is contemplating establishing its own home page. It has also released certain documents for publication on the Internet such as the Jenkins Committee report that is accessible from the Rutgers Accounting Web.

The New York State Society has established its own private bulletin board Luca Online� that will soon be available to readers of The CPA Journal.

Vendors. You may not have noticed, but your hardware and software vendors generally have established an Internet presence, and many have a private forum for technical discussions on one or more of the commercial services. To solve current issues and anticipate possible future issues, those with technical computer responsibilities and experience may find it helpful to be able to browse the vendor's bulletin boards for hardware and software issues already raised and answered.

Marketing and Client Identification

A more purposeful "surfing" of the Internet may give accounting firms ideas about future attest services that are not currently being marketed, such as database accuracy attestation and verifications of advertising and research claims. Such attestations may be more important to buyers as information acquisition becomes increasingly impersonal due to the wide marketplace and loss of personal association.

Additionally, the Internet may identify potential new clients from new companies in industries or areas of your firm's specialization from across the country, as these new companies seek a presence in the Internet community. Find a Web site that focuses on your industry of interest and happy surfing! For example, Media FX, Inc., located at‹

http://www.mediafx.com

provides Internet services and an index to geophysical and oil and gas companies throughout the world. To keep abreast of developments in mining and exploration, check out The Investor Channel (formerly The Mining Channel), on Canada's Wimsey server at‹

http://www.wimsey.com/

Some firms make a daily discipline of reviewing Commerce Business Daily to identify potential government contract opportunities. Yes, you can find a key word searchable Commerce Business Daily on the Internet, compliments (for a two-week trial period) of the CNS On-line Systems and Softshare Government Information Systems. For a fee, they will screen the opportunities for you and send the more likely ones directly to you. Try‹

gopher: //csns.com

Advertising. Large firms and small try to define a "competitive advantage" in their use of the Internet, but no one appears to have yet found the silver bullet. Accountants may wish to use the Internet to introduce themselves and their firms to potential customers. While a somewhat "buckshot" approach to advertising, this is also the age when the large firms plunk down big advertising dollars for TV air-time at premiere sports events. As with television, there is so much traffic on the Internet that somebody will surely see your "sign." To hang out your shingle, a home page needs to be created and some attractive copy and perhaps a photo or two inserted along with a contact link to interested customers. With a "value added" offering such as tax tips or a newsletter, you may be able to attract more attention. Better yet, be listed by another popular site for the industry or service audience you are targeting. Similarly, you can visit industry-focused sites and discussion groups to identify potential new customers or service needs that your firm may fill. For an example from the travel industry, visit TravelASSIST at‹

http://travelassist.com/mag/mag_home.html

Creating a Presence. The quickest way to develop a presence on the Web is through leased space on an established Web server. A list of firms is provided in Exhibit 4 that offer leased space and publishing and design services for both large commercial and individual users. Their services range from $100 to $300 per page per year, plus online access and/or maintenance. For a much greater investment, you can have control over the Web server, but you will have to develop considerable in-house expertise. You may also find your local university has excellent and experienced resources to help you create and publish your home page and updates at rates less than those commercially available. In this time of outsourcing, here may be one opportunity to avoid inventing your own wheel, particularly while you are thinking through your long-term Internet strategy.

Some Cautions

Accountants are a cautious lot by nature, and this is unfamiliar territory. When technology is relegated to the domain of technology professionals, it may be difficult for them to understand how accountants conduct their business, and thus may find it difficult to anticipate the sensitive issues for the nontechnologist auditor.

First, there is not much of an organizational structure. The Internet Architecture Board is a group of volunteers who set standards and monitor resources. The "ownership" of the Internet is undefinable. In fact, the loose organization is touted as one of the original positive attributes of the system itself. There are few operating rules and their enforcement is unclear. Its future continues to evolve, and its increasing commercialization keeps changing its character. Finally, there are some downside risks to playing in this sandbox.

Secondly, the legal environment surrounding the Internet is in an undefined state. First Amendment rights are under review as they relate to the materials being circulated and with the rather vague ownership and responsibi lity for the system. Copyright and other laws have yet to set much precedent. We are navigating uncharted waters here.

A third concern may arise once you have linked your firm with the Internet. We will call this the distraction index. There are some very interesting places to visit on the Internet. A lot more interesting than a client's tax problems. A gopher hole can lead to an Alice-in-Wonderland trip. An example comes from the live demonstration of the Rutgers Accounting Web at the Northeast Regional AAA Meeting in April 1995. Based on a casual comment by a presenter, the accountant participants became focused on seeing a demonstration of Socks the cat (at the White House) meow over the Internet. Accountants only want to have fun! We can't wait for Angie the receptionist to discover the Elvis Shrine site (addresses withheld by popular request). On a more serious note, your staff can seek out new job opportunities right from their desk. And it goes on and on. Businesses you wouldn't allow in your neighborhood are right there on the Internet. Unless you have a private system that screens or prevents access, cyberspace is completely open to browsers.

And speaking about undesirable things, there are some pesky as well as incredibly destructive viruses that can be downloaded in files. For the most part, business data locations are not the most dangerous place to "surf," but any unscreened file, carries a risk. For the most part, the commercial services screen for viruses, and most experienced users regularly scan files to detect these risks, but who needs to expose the firm's private files to capture or destruction? Who needs to have security breached and private files read? Even the "big boys" can have problems. In the late 1980s, a GAO report criticized the security procedures used by the Resolution Trust Company for transferring bank files over the Internet. Similarly, it was acknowledged that sensitive messages from the Pentagon were being intercepted during the Gulf War and became "news" almost before they were "orders." There are numerous examples of theft and industrial espionage via computer that involve the Internet as a successful entry and escape route. Scams have begun to appear in several commercial sectors. International firms, such as Network Security Management Ltd., have developed a specialty in the prevention, detection, and interception of technology-based frauds.

There are some "safe computing in the 90s" practices that can be followed to minimize the dangers. No foolproof system seems to exist, but security continues to be a hot topic, and various data encryption and screening programs can make computing relatively safe. The most important thing you can do in this regard is to follow these common-sense procedures:

* Restrict business computers to defined business uses.

* Do not freely interchange floppy disks between hardware without stopping to "think."

* Do not access the Internet using networked hardware.

* Do not transfer downloaded bulletin board files to sensitive and mission-critical network systems without scanning on an independent machine. In fact, you may want to isolate the computers used to access the Internet from other sensitive business networks.

* Evaluate the e-mail security and anti-virus safety of the system you are using.

* Be suspicious of unidentified e-mail and any suggestions to open unrequested files.

* Follow recommended microcomputer practices‹timely backups, install anti-viral or security software, etc.

* Scan all downloaded executable files while still compressed (zipped) using a package like Dr. Soloman's Anti-Virus Toolkit.

Additionally, users may wish to keep in mind the fluid nature of the Internet. Significant investments and business strategies that involve the Internet should reflect the short time horizon in which things can be reasonably expected to remain the same. For example, posting the EDGAR 10-K filings to the Internet was accomplished by a grant to New York University. The establishment of the Rutgers Accounting Web was also the result of a significant grant. The resources to maintain this information may not be perpetually committed, and at some point existing information may be withdrawn or cease to be free. Many issues need to be resolved regarding this direction, but the "no free lunch" principle applies here too, even though today there are lots of free "snacks." Exhibit 5 is a listing of relevant accounting resources on the Web.

What's the Future?

The long term future of the Internet is unclear. It seems a safe bet to forecast that the original purpose of the Internet‹a distributed process information and communication system that is resistant to centralized risks (like nuclear attack)‹is being realized and will continue. The logic of this system becoming a central publishing house for government and other public documents and databases is too compelling to ignore, and much movement in that direction is already observable. The speed and mechanism of commercialization of the other resources and resources yet to come to the Internet are topics of interest and much speculation. *

Lynford E. Graham, PhD, CPA, is associate professor of accounting and information systems at Rutgers University. Clinton F. White, DBA, is associate professor of accounting and management information systems at the University of Delaware.

NOVEMBER 1995 / THE CPA JOURNAL

Minimum Hardware 486/33 (or Mackintosh IIx), 14.4 modem

8Mb of RAM, 2-3 Mb of free hard disk space

Software TCP/IP software allows your computer to talk to the Internet.

Direct connection or by modem: You will be likely to purchase a "package" that includes a PPP or SLIP connection and browsing software. Popular Web browsers include Mosaic and Netscape.

Alternative Approach Commercial service "general access" packages such as CompuServe Information Service, Inc. (NetLauncher)

America Online ( AOL Web Browser)

Prodigy Services Company ( Prodigy Web Browser)

Delphi Internet ( Netscape)

These services are always upgrading and improving their offerings and browsers.

The Universal Resource Locator (URL)

Sample: http://www.rutgers.edu/Accounting/raw.html

To access: Under the File menu in many browsers, select Open URL and type it in.

Web: Web servers provide access to hyperlinked (you can travel from document to document via a link in the text) documents in a variety of formats, including text, graphics, audio, and full motion video. Web documents are referred to as pages. This service has become the one of choice when working on the Internet.

Gopher: Specialized computers with menus for accessing information. Primarily databases with text files. Most new sites today use URL addresses, but some resources have both Gopher and URL addresses.

Hypertext transfer protocol The address of the Web serverSubdirectory20NOVEMBER 1995 / THE CPA JOURNAL

Data Internet Address

Treasury Security Rates gopher://una.hh.lib.umich.edu/00/ebb/
monetary/quotes.txt

Currency Exchange Rates http://ww.ora.com/cgi-bin/ora/currency

Chicago Mercantile Exc. http://www.interaccess.com:80/cme/

US Census gopher://riceinfo.rice.edu/11/ and gopher://bigcat.missouri.edu/u/reference/
census/US

Economic Bulletin Board* telnet://trial@ebb.stat-usa.gov:23/or gopher://
una.hh.lib.umich.edu/ 11/ebb (downloaded data that is "free" from the University of Michigan)

Econ Data gopher://info.umd.edu:901/11/imforM/

Clarinet News Service** *clari.biz.economy *clari.biz.market.amex (or.dow, or .ny, or .otc)

*Limited free access **Fee is charged

SINGLE AUDIT BULLETIN BOARD

The President's Council on Integrity and Efficiency and the National Intergovernmental Audit Forum developed a BBS to provide information for audits of local governments, out-of-state governments, and not-for-profit organizations. The BBS also contains a wealth of other GAO documents.

When first logging onto the system, callers will be asked for their name, a password, and other information (address, phone number, etc.). After the initial registration, users are entitled to two hours of usage per day.

The BBS may be accessed through the Internet (telnet:// swais.access.gpo.gov) or by dialing the system with a modem [(202) 512-4286]. *

The Internet...

(Continued from page 22)

Product Name Provider

WebExpress (The WELL) http://www.well.com or web-info@well.com

PSINet (Performance Systems Int.) http://www.psi.net or info@psi.com

NETCOM (Netcom) http://www.netcom.com or glee@netcom.com

Web Server (Active Window Prod.) http://www.actwin.com

Access Plus+ (Results Direct) http://www.resultsdirect.com

The Internet Group (The Internet Group) http://www.tig.com

OneWorld (OneWorld Ent.) http://www.tidbits.com

Resource Internet Address

Accounting firms

Andersen Consulting, US http://www.ac.com/

Coopers & Lybrand, AU http://www.colybrand.com.au/

Deloitte & Touche http://www.dttus.com/

Ernst & Young http://www.inforamp.net/ey/

KPMG Peat Marwick http://hp.rad.kpmg.com/www/SSC/home.html

Price Waterhouse http://www.pw.com/

General financial

EDGAR SEC database http://www.sec.gov

Stock & portfolio analysis http://www.secapl.com/cgi-bin/qs

The World Bank http://www.worldbank.org/

Organizations & networks

AICPA http://www.rutgers.edu/
Accounting/raw/aicpa/home.htm

FASB http://www.rutgers.edu/
Accounting/raw/fasb/faf.htm

AAA http://www.rutgers.edu/
Accounting/raw/aaa/aaa.htm

European AA http://www.bham.ac.uk/business/eaacong.html/

International FAC http://aix1.uottawa.ca/~josephlj/ifac.html

ACCWeb http://mail.eskimo.com/~pretzl/accweb.html

AuditNet http://www.unf.edu/misc/jmayer/email/home.html

The International acctg network

ANet (AU) http://www.scu.edu.au/anet/ANetHomePage.html

RAW (US) http://www.rutgers.edu/Accounting/raw.html

SUMMA (UK) http://www.ex.ac.uk/~BJSpaul/ICAEW/summa/

ICAEWTEST.html

NOVEMBER 1995 / THE CPA JOURNAL