mcs in service org

1. NEWS REPORT
Levitt and P. Norman Roy, FEI
president, in which he replied to
Levitt's claim that the coniposi-rion
of the FAF bo.ird .iffected its
ability to oversee the FASB, say-ing,
"We emphatically do not
agree." In responding to the FEI's
suggestion that the FASB's agenda
be controlled by an independent
third-party organization, he said
that "the trustees have specifically
considered .ind rejected your rec-oinmendatioir'
because such a
change would be inconsistent
with an independent FASB. He
did, however, invite the FEI to
continue making suggestions to
improve the FASB's efficiency
and effectiveness.
Local government
representation
In a public statement on May 19,
the GFOA also took issue with
Levitt's proposals to change the make-up
ot the FAF, particularly with his
recommendation to reduce the pres-ence
of state and local government
representatives. "In meetings with the
C)FC^A and others, Levitt has insisted
emphatically and repeatedly that he
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change in value plus
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not accept any FAF trustee fi-om
• ^ United Sweden
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land
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Ivy Funds, Boca Raton, Florida
State or loca! government, either
elected or appointed, as a bona fide
representative of the public interest"
said the GFOA. In fact, the GFOA
said elected state and local govern-ment
officials were especially well-qualified
to serve the public interest
INTERNAL AUDIT
Flaherty Chosen to Head COSO
JohnJ. Flaherty has been appointed
chainnan of the Committee of Spon-soring
Organizations of the Treadway
Commission {CX")SO), A tbrmer vice-president
and general auditor of PepsiCo,
he served as chairman of the board of the
Institute of Internal Auditors. Flaherty
succeeds Gaylen N. Larson, a director at
Coopers & Lybrand, who resigned fol-lowing
his election to the Financial Ac-counting
Standards Board.
Flaherty said COSO's principal objec-tive
in the near term would be to revisit
John J. Flaherty
the issue ot fraudulent financial reporting 10 years after the issuance of the
Treadway commission's 19S7 Report of the National Commisskm on Fraudulent
Fincuidal Reportiiii;. He also would Hke to focus COSO's attention on the ef-fects
ot reengineering and downsizing. "We are concerned that recent
downsizing trends are weakening the internal control function in some
companies," he said.
Other issues Flaherty would like COSO to visit include the control risks
involved with new technology and data security- and a comparison of inter-nal
control methods throuj^hout the world. "Most of the issues that affect
internal controls transcend international boundaries," said Flaheitv.
on the FAF board. It also assailed
proposed SEC involvement in
FAF appointments, citing too
much federal intervention, and
called for cooperation in the
standard-setting process rather
than "federal fiats."
What is independence?
"Chairman Levitt and I don't
have a ditTerent objective; we're
both committed to an indepen-dent
and etTectivf FASB," Cook
told the Journal. "We do have a
difference of opinion on how we
govern that process." Cook said
he and the FAF were uncertain
about who exactly Levitt thought
was independent enough to serve
on the FAF board: "We don't
quite understand his criteria. Our
view is that all of us on the FAF
serve in the public interest, but
we accept the fact that some of us
come from and represent sponsoring
organizations."
At Cook's invitation, Levitt met
with the FAF on June 4 to discuss the
independence issue further. Although
nothing specific came out of the
meeting, Levitt said in a June 6 speech
to the SEC and Financial Importing
Institute that "in recent days the SEC'
and the FAF have made some progress
toward resolving our ditterences.
The November election is another
factor in the controversy; Because the
chair of the SEC is a presidential ap-pointee,
Levitt may not be a player at
the year's end. Also, Dennis Beresford
will be retiring as chairman of the
FASB in June 1997, and there is no
clear successor at this time.
See page 4 for late-breaking news.
MANAGEMENT CONSULTING
MCS Goes High Tech
CPA firms have been using the In-ternet
mostly for marketing, but
on May 21 Ernst ik Young took it a
step further and starting using it for
actual delivery of services. "Ernie" is a
management consulting service on
the World Wide Web aimed at com-panies
with revenues in the $25 mil-lion
to $200 million range. For a flat
fee of S6,000 a year, a company gets a
password to the site, where it can
search the firm's database and ask its
'*<if> JOLIRNAL 0/ ACCOUNTANCY 17

2. NEWS REPORT
tax, accounting and MCS advisers an
unlimited number of questions online.
E&Y promises a cwo-day response
turnaround.
"We see this as a complement to—
not a replacement of—our services,"
Brian J. Bauni, E&Y"s director of hi-ternet
service delivery, told the Journal.
"It's a way we can offer consulting ser-vices,
particularly to the entrepreneur-ial
community." He said direct contact
and engagement teams would still be
used for "major initiatives." However.
Baum said of the online venture,
"there's a whole other level of ser-vice—
when clients need help making
Smart Stops on the Web
World Wide Web sites
of interest to CFAs
Travel
h ttp: //www. travelocity.com
A u-sourto tor d(i-it-yniirst'It ir.ivi-l
plinning: rcscrvations, dps. special offers.
Assorteft information
h ttp: //www. m ere. com
Mercury Mail g-.uhers a wide assortment
of news (liusincss. stock reports, weather,
sports, entertainment), invites Internet
users to custoiiuzf exactly the topics they
are interested in. Mercury Mail will then
regularly e-mail that information to them.
Electronic library
http://wWTv.elibrary.coni
Actcss to KIIO pLiWic.itiiJiis: iii.i(ri/ines.
newspapers, newsletters, books.
Computer maintenance
http: //www. cyber media .com
Downloaii a beta copy of C^yberiiiedia's
Clil C'hanjje, an Internet service tor
continually updating all the drivers and
configii ration files your software uses.
Data backup
http://siirefind.com
Suretind proviiies a unique data backup
utility via the Internet. Subscribers
identify the files on the hard disk or
network they w.int to b;)i k up regul.irly.
and the Surefmd software automatically
copies them, encodes them for security;
and then transmits thetti, via the
Internet, to Siirefind's storage utihtj'.
The data tan he retrieved at any time.
informal decisions^—navigating issues
of change, new technology and new
tax practices, for example"—for
which Ernie could he an efficient and
economic answer.
The shape of things to come. "I see
this stuff bearing down on us like a
freight train." said Ron Seigneur of
Seigneur & Co., a five-person CPA
firm in Denver, speaking about Inter-net
services generally. He said that the
utility of online services was coming
into focus, with the Ernie initiative as
the way services are going to be deliv-ered.
"It will be a new era of what I
call 'connectivity' between firms and
clients and referral sources." Seigneur
is a member of the American Institute
ot CPAs management consulting ser-vices
executive committee.
Seigneur said viable Internet ser-vices
soon will trickle down to mid-size
and small firms. "There's no
reason a smaller firm can't offer some-thing
that's analogous to Ernie at a
lower tee." Ernie is simply making use
of many items on the most recent
AICPA top 15 technologies hst (see
JofA, Jan.96, pages 25-2H), Seigneur's
tlrm has already made a foray into the
Internet with its own Web page:
http://www.lawyernet.com/mem-bers/
seigneur, html.
The bottom line. Of course, the goal
for all practitioners is to inake money
from services. Baum said E&Y cur-rently
is marketing Ernie through a se-ries
of shows around the country.
Several hundred potential clients
signed up in tlie first month to see
Ernie in action.
Seigneur said although such ser-vices
can be successful, they need to
be part of a trend away from the tradi-tional
hourly method of billing. His
firm's experience with its hiw firm
clients revealed the legal profession is
ahead of CPAs in moving toward
fixed-fee arrangements. He said Ernif
and similar ventures would have to be
useful in themselves and not be only a
way to hook clients into traditional
hourly-rate services.
Meanwhile, Gene Prescott. chair of
the American Institute of CPAs tax
computer applications committee, has
visited Ernie twice. "It appears to be
designed to walk a novice through its
maze." he said. "However, although
the graphics are clear and consistent.
they take a long time to load—unless
users have a very fast connection they
better have a lot of patience." Users
can cut otf graphics, but many of them
contain useful intormation. "I think
E&Y is positioning Ernie for the fu-ture,"
he concluded, "when wide
bandwith is the rule and screens load
very fast."
GOVERNMENT ACCOUNTING
Orange County to Be
Back in the Black
In mid-May, a federal judge approved
a plau for Orange County, C.alifor-nia,
which had declared bankruptcy in
December 1994, to emerge from
bankruptcy protection by the end of
June. The earlier-than-expected an-nouncement
ot the turnaround was :i
triumph for the county's CPA treasur-er,
who had wanted to save the county
fix)m fiscal disa.ster but was only able to
pick up the pieces afterward.
Months betbre the crash, John M.
W. Moorlach, CPA, had argued dur-ing
an unsuccessful campaign for
county treasurer that the county's fiscal
policies were excessively risky. {See
"Be Skeptical, Dig for Facts. Orange
County CPA Urges," JofA, Mar.95,
page 14.) The county had, in f'act, in-vested
heavily in derivatives that pro-vided
high returns but were
imprudently volatile. But, in March
1995, several months atter the resigna-tion
of the man who defeated him.
Moorl;ii;h foiuid hiuisclf in the trea-
Orange County treasurer John Moorlach,
CPA, has put the county back on the right
fiscal track.
18 JOURNAL 0/ ACCOUNTANCY August 1996