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148 PUBLICACCOUNTINGFIRMSIntacct, May 8, 2002). There are significant security con-
cerns for exchanging consulting information between the
client and the CPA firms since most information is ex-
tremely sensitive, confidential, and damaging if it falls
into the wrong hands. Thus, CPA firms must examine
carefully whether proper encryption, authentication, and
virtual private network technologies are implemented
to secure information transmission of their online
services.
The reliability and availability of online real-time sys-
tems have made continuous audit and assurance possible.
According to Rezaee, Sharbatoghlie, Elam, and McMickle
(2002, p. 145), continuous audit and assurance is defined
as “a comprehensive electronic audit process that enables
auditors to provide some degree of assurance on con-
tinuous information simultaneously with, or shortly af-
ter, the disclosure of the information.” Moreover, both
researchers and practitioners indicate that real-time fi-
nancial reporting has necessitated continuous assurance
(Elliott, 2002; Rezaee et al., 2002). As Alles, Kogan, and
Vasarhelyi (2002) suggested, both WebTrust and SysTrust
are continuous assurance services offered by the AICPA
to respond to this need. Given the advances in technol-
ogy, some companies have developed online audit and
review tools for auditors to access the client’s database
and extract data anytime from anywhere for auditing pur-
poses (e.g., Intacct). Since more and more companies are
attempting to provide online real-time financial reports,
XBRL also plays a critical role in continuous assurance.
Clearly, changes in the audit paradigm will continue in
order to meet assurance-user needs in the future. The
short useful life of operating systems (OS) and applica-
tions may become an obstacle to implementing continu-
ous audits, however. By the time a continuous audit tool
is beta tested, installed, and implemented, the underly-
ing OS or applications may be upgraded, patched, or re-
placed, rendering the audit tool inoperable or causing it
to report false signals. CPA firms may need to work with
their clients to develop long-term strategic plans regard-
ing how to maintain the stability of the clients’ OS and
key applications to increase the feasibility of continuous
audits.
Other than assurance services, some of the larger CPA
firms have used the global 24/7 nature of the Internet to
broaden clients’ access to expertise within the firm. One
of the first and probably best known Internet-based con-
sulting services is “Ernie” created by the international ac-
counting firm Ernst & Young (EY) in 1996. Ernie, later
renamed Ernst & Young Online Services (n.d.), has been
marketed as an online business consultant that provides
low-cost access to EY experts in many areas including au-
dit, tax, human resources, strategy, information technol-
ogy, personal finance, and specified industries. EY routes
questions submitted from subscribers to experts through-
out its global practice, as needed, and clients typically are
promised an answer within 2 days.
Ernie was designed to serve a market of new and small
businesses with annual revenues under $250 million that
would benefit from having access to outside experts in a
variety of areas for which the business could not afford
to have its own in-house expertise. It began by charging a
fixed monthly fee and has evolved to be free for clients,with capped fees for online questions and charges for
certain tools. Key benefits of the online consulting service
is the quick turnaround on questions, because businesses
today tend to want “just-in-time” information. In addi-
tion to answering online questions, EY Online provides
a customized homepage for clients, access to a reference
library and news items, access to the client’s “EY Team,”
and some online tools for improved decision making.Tax Applications and Services
Technology has proved to be a tremendous improvement
in tax work due to the rote calculations involved, the link
between financial records and tax records, and the nature
of how tax returns are designed. For the past few decades,
tax preparation software has been used to perform various
tax functions, such as the calculation of depreciation on
assets and printing of W-2 forms from electronic payroll
data. Tax preparation software handles such functions as
the flowing of data from financial records to tax returns
and from tax form to related tax form, as well as error
correction. Use of the Internet to enhance tax software
applications allows for quicker and easier updates to the
software, greater options for data storage, and links to
tax information provided by the Internal Revenue Service
(IRS) and state tax agencies, as well as by commercial
providers of tax research information.
The Internet also allows a CPA firm to access needed
tax information directly from a client’s Web-based ac-
counting systems. Web-based tax preparation tools al-
low CPA firms to manage their tax preparation work
by tracking the status of return preparation—who is
working on a particular return and how far along it
is in the process. Web-based tax applications also al-
low for customized billing based on the detail needed
by clients, and they provide access to tax preparation
data and process from any location at any time. In ad-
dition, clients can easily e-mail data or files to their
CPA firm in a more secure and timely manner than
using the mail or a fax machine. Finally, many types
of tax returns can be filed electronically today. Dur-
ing the 2002 filing season, the IRS reported that about
46 million taxpayers filed their tax return electronically.
Also, about 105,000 tax preparers participated in the
e-filing program (IRS News Release, IR-2002-53, April 25,
2002, available at Tax Analysts’ Tax Notes Today, 2002 TNT
81-19). The benefits of e-filing include getting more ac-
curate information into the IRS databases and quicker
refunds.Accessing Information
CPAs are dependent on information. They need access to
the text of accounting pronouncements on generally ac-
cepted accounting principles (GAAP), tax research mate-
rials, ethics opinions and rules, and general business news
and information. The ability to access much of this infor-
mation on the Internet has greatly improved the efficiency
and mobility of CPAs.Tax Information
For decades, CPA firms relied on a physical library to ac-
cess tax statutes, regulations, rulings, other tax research
information, and tax forms. In the early 1990s, many of