Advanced Accounting Information Systems Day 27 Financial Reporting in an Electronic Environment October 28, 2009

Announcements –First XBRL assignment due 11/2

Objectives Understand basic concepts of the Internet such as TCP/IP, URLs, and web page addresses. Appreciate why electronic communication is useful to accountants Know why XBRL is important to financial reporting both external and internal Understand EDI and why it is important to AISs Know the differences between business to consumer and business to business e-commerce Appreciate the privacy and security issues associated with e- commerce Know why business use firewalls, proxy services, and encryption techniques Understand digital signatures and digital time-stamping techniques

Question for today How do accountants use the Internet?

Question for today Identify three newer Internet based technologies that you believe will be important today and in the future for accountants to know about.

How do accountants use the Internet? Research and education Participate in e-commerce Regularly evaluate controls that ensure complete, accurate, and authentic transmissions over the Internet

What is e-commerce? Buying and selling electronically Transmitting funds, goods, services, and/or data between two businesses or a business and a customer E-business – automating business processes in general via the Internet – –Retail sales –E-payments –EDI

What is the Internet? Collection of local and wide area networks that are connected together via the Internet backbone (main electronic connections of the system) Internet basics –Interact addresses and software Domain address (also called uniform resoruce locator (URL) IP address – numeric Uses TCP Internet protocol (transmission control protocol to deliver specific file to a specific computer at a specific computer location –Intranets and Extranets –WWW, HTML, and Edgar

Groupware, electronic conferencing, and blogs Groupware –Allows users to send and receive ,, plus perform a wide range of other document-editing tasks, schedule appointments, update same document, conduct electronic meetings - Exchange, Groupwise (Novelll) Lotus Notes, Exchange/Outlook (Microsoft) Instant messaging software –Enables remote users to communicate with each other via the Internet –Many support audio, video, and electronic conferencing –Accounting applications Interview job applications remotely Consult with clients about tax or audit problems Discuss projects from several remote sites Plan corporate budgets

Groupware, electronic conferencing, and blogs Knowledge management –May include groupware –Allows organization to distribute expertise within the organization (frequently on its INTRAnet) –Used by large consulting and accounting firms –Information includes descriptions of clients’ best practices, research, links to business web sites, and customized news Blogs –Allow users with web browsers and easy-to-use software to publish a personalized diary online –Introduces a new way to create, share, and leverage knowledge in an organization –Enterprise blogs provide companies with easy-to-use tools to manage internal and external information, which in turn affects relationships with customer, partners, investors as well as internal decision makers

XBRL – Financial Reporting on the Internet Exchanging financial information between trading partners often requires more detailed specifications – use of XML Two differences between HTML and XML –XML tags are extensible (allowing users to define their own tags such as ) –XML tags actually describe the data rather than simply indicate how to display it Problem with XML tags –Lack of consistency among users –i.e. vs XBRL – standardizes the tags that describe financial information in documents for both profit and nonprofit organizations

XBRL – Financial Reporting on the Internet XBRL International XBRL.US XBRL instance documents –Examples (instances) of a class of documents defined by a standard or specification To create XBRL instance document –Know standard tags that define such familiar items as net revenues and operating expenses –Know the rules that govern how to use these tags –Determine if extensions are needed

Electronic Commerce –Retail sales –E-payments and e-wallets –Electronic data interchange

Privacy and Security on Internet Privacy and identity theft Security Firewalls Intrusion detection systems Value-added networks Proxy servers

Data encryption Techniques that transform plaintext messages into unintellible cypertext Cyclic substitution Encryption key DES Secret key cyyptography Public key encryption

Digital Signatures and Digital Time Stamping Digital signature –1994 –Digital certificate –Certificate authority

SEC Fake Web Site

Questions for Friday What is the key difference between HTML and XML? Why is XBRL important?