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  1. 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 The Top Five Performing Stock Markets in 1995 These countries had the highest Increase in overall total return change in value plus dividends) in not accept any FAF trustee fi-om • ^ United Sweden Switzer- states land Nether-lands 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. 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

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