When the Bottom Line Is Online

Corporations have established Web sites to market their products and services, to offer freebies to potential customers or just to polish the corporate image. Increasingly, companies are finding still another use for the Web: publishing a wealth of financial information about themselves, including annual and quarterly reports and filings with the Securities and Exchange Commission. The Internet gives companies far more options than print, including plenty of space to add financial pages and even audio and video clips. Regulatory bodies barely have begun to address accounting and auditing issues, but many corporations are pushing the limits right now, bringing generally accepted accounting principles and generally accepted auditing standards into the information age. All CPAs, especially those in business and industry, should be aware of the implications--and the opportunities. TECHNICAL ISSUES Before CPAs interested in putting their companies' financial statements online start uploading pages of data, they should consider the following questions, keeping in mind that the answers may change in the near future. * "Can a company omit the printed statement altogether if it puts its statements on its Web site? " The cost savings for a large company that has to send statements to thousands of stockholders could be significant. Right now, most public companies, however, like most stockholders, are not online. SEC spokesman John Heine told the Journal that "basically, the rules that apply to paper disclosures apply to electronic disclosure as well. Companies can offer shareholders the option of receiving required information online but still must make the paper version available. " A comprehensive SEC report on on-line disclosures is on the SEC Web Site; go to release no. 33-7233 at http://www.sec. gov/. (The SEC has been requiring companies to file certain documents online for public viewing. For more details, go to http:// www.sec.gov/edaux/wedgar.htm.) * "What additional disclosures can, or should, companies put on the Web? " Even Fortune 500 companies, with their fat, glossy annual reports, can't find the room in them to add all the financial information they would like. But computer memory is cheap, and a Web site offers an almost unlimited amount of room. Many companies hyperlink to the SEC site for 10-K and 10-Q filings. Some even have copied portions of the SEC site to their own sites, so visitors can view filings--without leaving the company's pages. Another popular feature is a hyperlink to one of several online quotation services, allowing visitors to check out the price of the company's stock. It's almost like getting an updated financial statement every 20 minutes. (There are a number of such services; one example is http://quote.pathfinder.com/money/quote/qc.) * "What is the auditor's responsibility? " Or, from the company's viewpoint, "What can it expect the auditor to look at, especially regarding all these additional disclosures? " The American Institute of CPAs auditing standards board issued an interpretation to AU section 550 titled "Other Information in Electronic Sites Containing Audited Financial Statements" (see page 114 in this month's Official Releases), which says auditors have no responsibility for considering or even reading online information. However, Practice Alert 97-1 advises CPAs to consider potential problems: Is the site secure, or can hackers break in and alter financial information? Has the company clearly separated financial statements and the auditor's report from other information so unsophisticated investors are not misled? (This alert, a brief discussion intended to provide guidance on online statements, appears in a supplement to the January/February 1997 CPA Letter for AICPA members in public accounting firms. Members who did not receive this supplement can get a copy from AICPA Online, the Accountants Forum and the faxback system, 201-938-3787. …