NEWS REPORT

Levitt and P. Norman Roy, FEIpresident, in which he replied toLevitt's claim that the coniposi-rion of the FAF bo.ird .iffected itsability to oversee the FASB, say-ing, "We emphatically do notagree." In responding to the FEI'ssuggestion that the FASB's agendabe controlled by an independentthird-party organization, he saidthat "the trustees have specificallyconsidered .ind rejected your rec-oinmendatioir' because such achange would be inconsistentwith an independent FASB. Hedid, however, invite the FEI tocontinue making suggestions toimprove the FASB's efficiencyand effectiveness.

Local governmentrepresentationIn a public statement on May 19,the GFOA also took issue withLevitt's proposals to change the make-up ot the FAF, particularly with hisrecommendation to reduce the pres-ence of state and local governmentrepresentatives. "In meetings with theC)FC^A and others, Levitt has insistedemphatically and repeatedly that he

not accept any FAF trustee fi-om

The Top Five PerformingStock Markets in 1995

These countries hadthe highest Increase inoverall total returnchange in value plus

dividends) in

• ^ United SwedenSwitzer- states

land

Nether-lands

Ivy Funds, Boca Raton, Florida

State or loca! government, eitherelected or appointed, as a bona fiderepresentative of the public interest"said the GFOA. In fact, the GFOAsaid elected state and local govern-ment officials were especially well-qualified to serve the public interest

INTERNAL AUDIT

Flaherty Chosen to Head COSO

J ohnJ . Flaherty has been appointedchainnan of the Committee of Spon-

soring Organizations of the TreadwayCommission {CX")SO), A tbrmer vice-president and general auditor of PepsiCo,he served as chairman of the board of theInstitute of Internal Auditors. Flahertysucceeds Gaylen N. Larson, a director atCoopers & 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 revisitthe issue ot fraudulent financial reporting 10 years after the issuance of theTreadway commission's 19S7 Report of the National Commisskm on FraudulentFincuidal Reportiiii;. He also would Hke to focus COSO's attention on the ef-fects ot reengineering and downsizing. "We are concerned that recentdownsizing trends are weakening the internal control function in somecompanies," he said.

Other issues Flaherty would like COSO to visit include the control risksinvolved with new technology and data security- and a comparison of inter-nal control methods throuj^hout the world. "Most of the issues that affectinternal controls transcend international boundaries," said Flaheitv.

John J. Flaherty

on the FAF board. It also assailedproposed SEC involvement inFAF appointments, citing toomuch federal intervention, andcalled for cooperation in thestandard-setting process ratherthan "federal fiats."

What is independence?"Chairman Levitt and I don'thave a ditTerent objective; we'reboth committed to an indepen-dent and etTectivf FASB," Cooktold the Journal. "We do have adifference of opinion on how wegovern that process." Cook saidhe and the FAF were uncertainabout who exactly Levitt thoughtwas independent enough to serveon the FAF board: "We don'tquite understand his criteria. Ourview is that all of us on the FAFserve in the public interest, butwe accept the fact that some of us

come from and represent sponsoringorganizations."

At Cook's invitation, Levitt metwith the FAF on June 4 to discuss theindependence issue further. Althoughnothing specific came out of themeeting, Levitt said in a June 6 speechto the SEC and Financial ImportingInstitute that "in recent days the SEC'and the FAF have made some progresstoward resolving our ditterences.

The November election is anotherfactor in the controversy; Because thechair of the SEC is a presidential ap-pointee, Levitt may not be a player atthe year's end. Also, Dennis Beresfordwill be retiring as chairman of theFASB in June 1997, and there is noclear 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 astep further and starting using it foractual delivery of services. "Ernie" is amanagement consulting service onthe World Wide Web aimed at com-panies with revenues in the $25 mil-lion to $200 million range. For a flatfee of S6,000 a year, a company gets apassword to the site, where it cansearch the firm's database and ask its

'*<if> JOLIRNAL 0/ ACCOUNTANCY 17

NEWS REPORT

tax, accounting and MCS advisers anunlimited number of questions online.E&Y promises a cwo-day responseturnaround.

"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 contactand engagement teams would still beused 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 sitesof interest to CFAs

Travelh ttp: //www. travelocity.com

A u-sourto tor d(i-it-yniirst'It ir.ivi-lplinning: rcscrvations, dps. special offers.

Assorteft informationh ttp: //www. m ere. com

Mercury Mail g-.uhers a wide assortmentof news (liusincss. stock reports, weather,

sports, entertainment), invites Internetusers to custoiiuzf exactly the topics theyare interested in. Mercury Mail will then

regularly e-mail that information to them.

Electronic libraryhttp://wWTv.elibrary.coni

Actcss to KIIO pLiWic.itiiJiis: iii.i(ri/ines.newspapers, newsletters, books.

Computer maintenancehttp: //www. cyber media .com

Downloaii a beta copy of C^yberiiiedia'sClil C'hanjje, an Internet service tor

continually updating all the drivers andconfigii ration files your software uses.

Data backuphttp://siirefind.com

Suretind proviiies a unique data backuputility via the Internet. Subscribersidentify the files on the hard disk or

network they w.int to b;)i k up regul.irly.and the Surefmd software automaticallycopies them, encodes them for security;

and then transmits thetti, via theInternet, to Siirefind's storage utihtj'.

The data tan he retrieved at any time.

informal decisions^—navigating issuesof change, new technology and newtax practices, for example"—forwhich Ernie could he an efficient andeconomic answer.

The shape of things to come. "I seethis stuff bearing down on us like afreight train." said Ron Seigneur ofSeigneur & Co., a five-person CPAfirm in Denver, speaking about Inter-net services generally. He said that theutility of online services was cominginto focus, with the Ernie initiative asthe way services are going to be deliv-ered. "It will be a new era of what Icall 'connectivity' between firms andclients and referral sources." Seigneuris a member of the American Instituteot 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 noreason a smaller firm can't offer some-thing that's analogous to Ernie at alower tee." Ernie is simply making useof many items on the most recentAICPA top 15 technologies hst (seeJofA, Jan.96, pages 25-2H), Seigneur'stlrm has already made a foray into theInternet with its own Web page:http://www.lawyernet.com/mem-bers/seigneur, html.

The bottom line. Of course, the goalfor all practitioners is to inake moneyfrom services. Baum said E&Y cur-rently is marketing Ernie through a se-ries of shows around the country.Several hundred potential clientssigned up in tlie first month to seeErnie in action.

Seigneur said although such ser-vices can be successful, they need tobe part of a trend away from the tradi-tional hourly method of billing. Hisfirm's experience with its hiw firmclients revealed the legal profession isahead of CPAs in moving towardfixed-fee arrangements. He said Ernifand similar ventures would have to beuseful in themselves and not be only away to hook clients into traditionalhourly-rate services.

Meanwhile, Gene Prescott. chair ofthe American Institute of CPAs taxcomputer applications committee, hasvisited Ernie twice. "It appears to bedesigned to walk a novice through itsmaze." he said. "However, althoughthe graphics are clear and consistent.they take a long time to load—unless

users have a very fast connection theybetter have a lot of patience." Userscan cut otf graphics, but many of themcontain useful intormation. "I thinkE&Y is positioning Ernie for the fu-ture," he concluded, "when widebandwith is the rule and screens loadvery fast."

GOVERNMENT ACCOUNTING

Orange County to BeBack in the Black

I n mid-May, a federal judge approveda plau for Orange County, C.alifor-

nia, which had declared bankruptcy inDecember 1994, to emerge frombankruptcy protection by the end ofJune. The earlier-than-expected an-nouncement ot the turnaround was :itriumph for the county's CPA treasur-er, who had wanted to save the countyfix)m fiscal disa.ster but was only able topick up the pieces afterward.

Months betbre the crash, John M.W. Moorlach, CPA, had argued dur-ing an unsuccessful campaign forcounty treasurer that the county's fiscalpolicies were excessively risky. {See"Be Skeptical, Dig for Facts. OrangeCounty CPA Urges," JofA, Mar.95,page 14.) The county had, in f'act, in-vested heavily in derivatives that pro-vided high returns but wereimprudently volatile. But, in March1995, 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 rightfiscal track.

18 JOURNAL 0/ ACCOUNTANCY A u g u s t 1996