Transcript chapter12

Chapter 12
Accounting on the Internet
The Internet and the World Wide Web
XBRL – Financial Reporting on the Internet
Electronic Commerce
Privacy and Security on the
The Internet and
World Wide Web
• The Internet is a collection of local and
wide-area networks that are now
connection together via the Internet
• An Internet service provider
(ISP) maintains its own Internet
Internet Addresses and
• To transmit data over the Internet, a computer
uses an Internet address and a forwarding system.
• The Internet address begins as a domain address,
which is also called a universal resource locator
• Internet computers translate text-based domain
addresses into numeric Internet protocol (IP)
addresses such as
Intranets and Extranets
• Intranets are internal company networks
that use the same software as the
• Some businesses create Extranets that
enable selected outside users to access
their Intranets.
The World Wide Web
• The multimedia portion of the Internet is
called the World Wide Web or just “the
• A web browser enables users to view the
graphics files of the Internet.
• Web pages are created in an editing
language such as hypertext markup
language (HTML).
The World Wide Web
• The Internet transfers web pages from one
computer to another using a communications
protocol such as hypertext transfer protocol
• A home page is the first page a user
sees when he or she supplies a
web browser with a domain
• Home pages act as a table of
contents with hyperlinks to other
web pages.
Groupware, Electronic
Conferencing, and Blogs
• Groupware allows users to send and receive
email, plus perform a wide range of other
document-editing tasks.
• Groupware allow users to collaborate on work
tasks, make revisions to the same document,
schedule appointments on each
other’s calendars, share files
and databases, conduct
electronic meetings, and
develop custom applications.
Groupware, Electronic
Conferencing, and Blogs
• Instant Messaging Software enables remote
users to communicate with each other via the
• Electronic Conferencing
enables several users to
join a discussion instead
of just two.
Groupware, Electronic
Conferencing, and Blogs
• Electronic mail enables individuals or
companies to communicate with other
Internet users around world.
Groupware, Electronic
Conferencing, and Blogs
• Blogs or web logs allows users with Web
browsers and easy-to-use software to publish a
personalized diary online. Blogging introduces
a new way to create, share,
and leverage knowledge in
an organization.
XBRL – Financial Reporting
on the Internet
• The primary repository of financial
information on the Internet is the Security and
Exchange Commission’s Electronic Data
Gathering and Retrieval Database (EDGAR).
• EDGAR contains the financial report filings of
U.S. publicly held companies in plaintext
• PricewaterhouseCoopers developed EdgarScan
to take the information in EDGAR and change
it to a common format.
XBRL – Financial Reporting
on the Internet
• EdgarScan’s common format allows users to
extract data from multiple companies and
compare it.
• However, such comparisons are limited to
formal financial report filings for a limited set
of enterprises.
• The eXtensible Business Reporting Language
(XBRL) is a specialized software language for
the financial reporting industry.
XBRL – Financial Reporting
on the Internet
• XBRL is a subset of eXtensible Markup
Language (XML).
• XML is similar to HTML and yet different
– Its tags are extensible
– The tags describe the data rather than just
indicating their display
• XBRL is a global effort by the XBRL Steering
Committee (
XBRL – Financial Reporting
on the Internet
• XBRL’s many benefits include:
– Single-format filing
– Ease of corporate comparisons
How Does XBRL Affect
Accountants? - Slide 1
• Provides greater transparency
• Permits automatic and reliable exchange of
financial information across different formats
and technologies
• Does not require a change to existing accounting
standards or disclosure requirements
• Eliminates the need to re-enter financial data for
different users
How Does XBRL Affect
Accountants? - Slide 2
• Lowers the cost of the preparation and
distribution of financial statements
• Improves investor- and analyst- access to
• Allows accountants to consolidate and scrutinize
internal data for financial reporting purposes
• Allows CEOs and CFOs to deliver more
transparent information
Electronic Commerce
• Electronic Commerce (EC) refers to
conducting business with computers and
data communications.
• EC can be performed over the Internet or
using proprietary lines.
• General categories of EC include
retail sales, E-payments and
E-wallets, and electronic data
Retail Sales Advantages of
Virtual Stores – Slide 1
1. Web pages are much cheaper than
creating and mailing catalogs;
2. Distribution is global;
3. Sales can occur around the clock;
4. Customers can search for specific
products or services electronically,
either within a particular web site or
as a “hit” from another site;
Retail Sales Advantages of
Virtual Stores – Slide 2
5. Businesses can easily outsource its web
business to others, enabling it to focus
on core processes;
6. The web sites themselves can use
automated tools to verify customer
credit cards;
7. Businesses can send emails to confirm
orders or advise customers about
shipping dates;
Retail Sales Advantages of
Virtual Stores – Slide 3
8. Businesses can update product
descriptions, sales prices, and
information on merchandise availability
9. Customers create their own sales orders
Retail Sales Advantages of
Virtual Stores – Slide 4
10. Customers can track their own orders,
freeing business personnel for other
tasks, and;
11. The sales and customer relations
personnel required for these virtual
stores is minimal, thus reducing labor
costs per dollar of sales.
• With the use of credit cards over the Internet,
identity fraud can be a problem.
• Electronic payment (E-payment) may be a more
desirable payment method.
• The most important advantage of E-payment is
the ability to identify its users.
• E-payment eliminates the
need to transmit credit card
numbers over the Internet.
• E-wallets are software applications that
store a consumer’s personal information,
including credit card numbers, email
addresses, and shipping addresses.
• The advantage of an e-wallet is
that you do not have to enter
all your personal information
every time you make an
online purchase.
• Most e-commerce is business-to-business (B2B).
• A major part of B2B e-commerce concerns
purchases of supplies and equipment
electronically or electronic procurement.
• Companies may manage their supply chain by
linking e-commerce to internal enterprise
resource planning (ERP) systems.
Electronic Data Interchange
Electronic Data Interchange (EDI) allows
organizations to transmit standard business
documents over high-speed data communications
EDI streamlines processes because
1) business partners exchange documents quickly and
2) there are no postal delays, and
3) EDI eliminates most of the paperwork.
VAN-based EDI versus
Internet-based EDI
• To implement EDI applications, most businesses
currently use private, point-to-point
communication channels called Value-Added
Networks (VANs).
• An alternative to VAN-based EDI is to use the
– Advantages of Internet-based EDI are the ability to
use well-understood Internet technology, a preexisting,
costless network to transmit business data, and
– Disadvantages of using Internet-based EDI are data
security and lack of consulting expertise in the
implementation phase.
Privacy and Security
on the Internet
• The Internet and WWW have the
advantage of being very accessible.
• Accessibility can also mean “vulnerability.”
• Email, web pages, and computer
files can be accessed by
someone posing as an
authorized user.
Privacy and Security
• An Internet presence for companies
introduces unique privacy and security
• These concerns call for specialized controls
that limit data and information access to
authorized users.
• Authentication involves
verifying that users are
who they say they are.
• A firewall guards against unauthorized access to
sensitive file information from external Internet users.
• This is security software that a company installs on
Internet computers and that limits file accesses to
authorized users.
• Firewall software examines packets of
incoming messages using an access
control list.
• Firewalls cannot prevent spoofing,
masquerading as an authorized user.
Proxy Servers
• A Proxy Server is a computer and related
software that creates a transparent gateway
to and from the Internet, and that can be
used to control Web accesses.
Proxy Servers
Five advantages of proxy servers:
1. Funnel all incoming and outgoing Internet requests
through a single server.
2. Examine all incoming requests for information and
test them for authenticity.
3. Limit employee Internet access to approved Web
4. Limit information to only Internet-related
5. Ability to store frequently accessed web pages on
the server’s own hard disk.
Data Encryption
• Data Encryption transforms plaintext messages
into unintelligible cyphertext ones using an
encryption key.
• Data encryption standard (DES) is an
encryption scheme used by the U.S.
• A single key is shared by communicating
parties in secret key cryptography.
• Public key encryption requires each party to
use a pair of public/private encryption keys.
Digital Signatures
• A digital signature is used to authenticate
business documents transmitted or received
over the Internet.
• In 1994, the digital signature
standard (DSS) was adopted by
the National Institute of Standards
and Technology.
• The presence of the digital signature
authenticates a document.
Digital Certificate
• Another authentication technique is the
digital certificate.
• Digital certificates are verification of
identity provided by an independent
third party called a certificate authority.
• These certificates are signed documents
with sender names and public key
Digital Time Stamping
• Many important documents transmitted over
the Internet are time sensitive.
• Digital time-stamping services (DTSSs) attach
digital time stamps to documents.
• Time stamps enable businesses
to overcome problems of downed
file serves or power failures
delay transmission.
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Chapter 12