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“Superior job of capturing current events.” Says Dennis Hanno, Professor, Department of Accounting, University of Massachusetts.
An interesting issued that came across the Wall Street Journal the last month was regarding Internet Financial Accounting Reporting. How can companies improve the usefulness of their financial accounting reporting practices? Many companies are using the power and reach of the Internet to provide more useful information to financial statement readers.
Recent surveys indicate that over 80% of large companies have Internet sites, and a large proportion of these companies’ Web sites contain links of their financial statements and other disclosures. The increased popularity of such reporting is not surprising, since the costs of printing and dissemination of paper reports could be reduced with the use of Internet reporting.
How does Internet financial accounting reporting improve the overall usefulness of a company’s financial reports? First, the dissemination of reports via the Web can allow firms to communicate with more users than is possible with traditional paper reports. In addition, Internet reporting allows users to take advantage of tools such as search engines and hyperlinks to quickly find information about the firm and, sometimes, to download the information for analysis, perhaps in computer spreadsheets.
Finally, Internet reporting can help make financial reports more relevant by allowing companies to report expanded disaggregated data and more timely data than is possible through paper-based reporting. For example, some companies voluntarily report weekly sales data and segment operating data on their Web sites.
Thus, although Internet financial reporting is gaining in popularity until issues related to differential access to the Internet and the reliability of information disseminated via the Web are addressed, we will continue to see traditional paper-based reported, states Michael Fox, Audit Partner at Deloitte & Touche.
Another important source of information that is often overlooked is the auditor’s report. An auditor is an accounting professional who conducts an independent examination of the accounting data presented by a business enterprise. If the auditor is satisfied that the financial statements present the financial position, results of operations and cash flow fairly in accordance with generally accepted accounting principles, an unqualified opinion is issued.
In preparing a report, the auditor follows these reporting standards:
1. The report shall state whether the financial statements are presented in accordance with generally accepted accounting principles.
2. The report shall identify those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period.
3. Informative disclosures in the financial statements are to be regarded as reasonably adequate unless otherwise stated in the report.
4. The report shall contain either an expression of opinion regarding the financial statements taken as a whole or an assertion to the effect that an opinion cannot be expressed. When an overall opinion cannot be expressed, the reasons why should be stated. In all cases where an auditor’s name is associated with financial statements, the report should contain a clear-cut indication of the character of the auditor’s examination, if any, and the degree of responsibility being taken.
Since I myself work at Deloitte & Touche, I have been very interested in the advances of the company in relation to the tax practice. At last week Washington Post newspaper there was an outstanding article regarding Deloitte & Touche response to President Bush’s tax cut legislation.
On May 26, Congress adopted the Economic Growth and Tax Relief Reconciliation Act of 2001 (The Act), a modified version of President Bush’s 2001 tax cut legislation, at a cost of $1.35 trillion over 10 years. The Act presents taxpayers with an array of tax planning challenges and opportunities.
The Act includes significant tax rate reductions, marriage penalty relief, a substantial increase in the child credit, new education savings incentives, repeal of the estate tax, and a package of pension reforms.
The Tax Policy Services Group of Deloitte & Touche, along with other tax professionals in the Washington National Tax Office, has written a book entitled Seeds of Change: The 2001 Tax Cut that describes the Act and discusses planning opportunities for our clients. I had a chance to look over this book and personally found it very interesting and consisted.
It is crucial to carry out a superior tax planning strategy before taking any action. It is crucial to plan in order to realize a better tax benefit at the end. A tax-planning strategy consists of an action that meets certain criteria and that would be implemented to realize a tax benefit for an operating loss or tax credit carryforward before it expires.
I am certain that the September 11 terrorist attacks (the September 11 events) have been what caused the most impact in recent years on the following subjects: financial reporting, auditing specialty and tax accounting specialty. This event resulted in the interruption of the business activities of many entities, business losses, and overall disruption of the US economy at many levels.
In the past, businesses have incurred losses as a result of catastrophes such as earthquakes, hurricanes and even other terrorist attacks. However, the September 11 events are unprecedented in the United States in terms of the magnitude of the losses incurred and the number of entities affected.
Businesses were impacted in different ways and magnitudes. US air travel system was closed down for over 24 hours meaning a tremendous loss in revenue, NYSE, as well as Dow Jones and all the others, suffered a magnitude deficit as well. I could go on and on about all the different areas and businesses that were affected by this event, and in the end, I would say that absolutely every business was affected in one way or another.
In addition to the tragic loss of thousands of lives, businesses are now faced with the challenge of providing meaningful financial information to the public reflecting changes precipitated by recent events.
The Internal Revenue Service (IRS) and Treasury Department have announced immediate changes in tax administration in the wake of the terrorist attacks of September 11, 2001.
Payment and filing dates have been adjusted not only for those taxpayers in the attack-affected areas, but for all U.S. citizens as well. Those people most seriously impacted by the East Coast tragedy are being given long-term tax relief, while the country at large has a short respite from their tax obligations.
The IRS has announced that it will now accept federal tax payments from individuals, as well as businesses, through a web site it launched at a September 6, 2001, press conference. It is the first time the IRS is using the Internet to interact directly with taxpayers and their representatives to address tax data and payments, IRS Commissioner Charles O. Rossotti noted.
With the incidents occurring so near to the close of the third quarter—and affecting a broad spectrum of companies—the accounting profession and the FASB are challenged with responding to financial reporting questions that have arisen from these events. Absent EITF guidance, many companies and their auditors would be faced with individually answering those questions in early October.
CPAs will be facing several challenges as a result of the September events. They will encounter many changes in the tax treatment for example since there have been issued tax relieves for those families affected by the terrorist. Also, since many businesses were hurt, the audit practice will be affected as well, having fewer clients to serve. And finally, everything will be reported in the accounting report, showing the breaking news.
Hollander, Denna, Cherrington; Accounting, Information Technology, and Business Solutions; Irwin McGraw-Hill, Second Edition; Boston, 1999.
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