Information has become the largest resource for many companies. As companies move from national to international markets, they are relying on their information resources more than ever. Accountants in the past have had an instrumental role in helping the users gain confidence in this information. As information systems become more technical, so is the focus of accounting.

Many of the large accounting firms have implemented systems used by their auditors that enable them to add value to the information that they are giving to the client. Local and regional accounting firms are beginning to make the upgrades in order to survive. The following model illustrates some of the information technologies that the local/regional accountants are using:

These technologies are not new; they are creating a more efficient audit. Accountants have missed much of the theories behind the technology upgrades. These technologies are meant to improve systems and not just efficiencies. Accountants must continue to strive for these technological advances in order to survive in today’s business environment.

The majority of accountants over the last 30 years have been computer averse. One of the major topics currently being pushed by the AICPA (American Institute of Public Accountants) is the issue of continual learning and improvement in the "technology" related field (Mancino, 1998). Accountants are beginning to realize that their customers want more value adding services outside the basic audit. Many of the smaller local and regional accounting firms do not have the expertise or the technological resources to assist in this area.

The current "Big Five" accounting firms have all implemented such systems and recently are seeing the benefits of this "new" technology. "New" meaning that the accounting firms are using microcomputers and laptops to do their consulting and engagement work when in the past it was done with pencil and paper. These large national/global accounting firms are also using new auditing techniques such as audit modules in order to increase audit accuracy and efficiency.

How is this transition achieved between technological infancy to technological maturity? The problem is better defined if the accounting field is viewed as two main groups. They could be viewed as the technological haves and the technological have-nots. The larger accounting firms, those that practice on the national level, have all implemented new systems. The local and medium to small regional firms have not yet implemented these new systems. Why is this?

The obvious answer is capital. The local/regional accounting firms have not budgeted the capital necessary to implement programs that will upgrade their current processes to the newer technologies. There is no money for technical upgrades according to many of these firms. Actually there is money to implement these new systems, the problem lies with the partners lack of interest. These senior level partners are in control of the capital expenditures and thus many firms are not implementing new technologies. They do not see the need for implementing advanced information technologies because they do not have the skills to utilize these resources.

This situation leads into the discussion of how the field of information systems was developed. In the 70’s, many accountants turned their backs on these new information technologies; companies had to have people that could provide these services. The field of Management Information Systems (MIS) sprung out of this need and today has become a vital part to any organization. Many of today’s companies view their information systems as their lifeline to business and continually strive to have the best and most efficient. Information is becoming one of the biggest resources for companies and many want more out of this information.

Accounting is currently experiencing what much of the world is experiencing, a huge push to provide better information, faster. Not only are accounting firms trying to speed up the audit process; they are continually trying to improve the steps in the audit plan while being budget conscious (ISACF, Internet Site). Providing a better product with lower costs is a win-win situation for everyone involved. Auditors spend less time on the audit and thus the firm is able to provide more services outside of a normal audit. Some of these services are tax issues, legal issues, and Internet security. Consulting is a very large field that has remained untouched by many of the local accounting/auditing firms.

With accountants pushing more towards consulting than auditing, accountants and many consulting firms are seeing that the needs of their clients are becoming much more diverse, complex, and international. Having the ability to quickly assess the information and system needs as well as the changes necessary to correct can make or break accounting and consulting firms. This is another reason why accountants need to continuously update themselves on the latest technologies in the market.

With the increased effort to become more efficient many companies have began to use "paperless" business practices (ISACF, Internet Site). Paperless methods not only cut down on clerical inaccuracy; they increase the speed of the business transactions. This is the future of business, and the old ways of auditing do not provide the techniques to properly review and assess the financial information of an electronic "paperless" company.

Since these new electronic business methods have reduced and, in some cases, eliminated paper, thus the paper trail used by accountants/auditors has vanished (Pearson, 1996). Without the paper, the accountant must rely on system controls that ensure that the system is operating properly. Making sure that all transactions are authorized, complete, and accurate is very important. If the system does not properly capture, process, and output the information in an accurate and complete manner, then the users cannot rely on the financial statements. Garbage in equals garbage out. Information coming in must be clean and error free. Without proper input controls in place, the system may perform perfectly, but allow incorrect data to enter the system. This results in incorrect information coming out of the system.

Auditing techniques of old are being modified or discarded to ensure the reasonableness of EDI exchanges and even the system performance for businesses. Accountants are now using embedded modules and parallel testing to ensure that the data being transmitted in these paperless exchanges is correct. Obviously this is of utmost importance to many accountants. Needless to say, this issue has not gone unrecognized.

In 1991 the American Institute of Certified Public Accountants (AICPA) Vision project was formed. This project captured the concerns of many accountants at the time and they were ordered from the most important to least important technology threats/opportunities that face accounting and auditing today (AICPA Vision Project Representative). The Vision project looked down the road 20 years to the year 2011 and asked one question. "What will the field of accounting be doing at this time?" The issues that arose most frequently were as follows: 1. Security, 2. Electronic Commerce, 3. Continuous Auditing, 4. The Internet, 5. Electronic Data Interchange (EDI), 6. Image Processing, 7. Year 2000 Issues, and 8. Paperless Auditing (Mancino, 1998).

Since then, the main focus of the Vision project has shifted to technology. This very broad and generic term better fits the changing market for accountants. The Vision project has missed one very important point. The life cycle for most technology is measured in months, not years. The Vision project is looking off 20 years, when the field of accounting needs to take a crash course in technology and bring that time interval down to month long life cycle (AICPA Vision Project Representative).

Another very important group to the future of accounting and auditing is the Information Systems Audit and Control Association. This group is making a very big effort to bridge the gap between information technology and accounting. Accounting is concerned with managing company resources. Information technology manages a company’s largest resource, information. Accountants feel that in order to survive the automation of many of the accounting and auditing functions, they must provide more informational services.

Auditing is an evaluation of accountants that is concerned with whether or not transactions and events in the past are being properly recorded (Romney & Steinbart, 1997). So what is wrong with this? It is concerned with the past. Companies know what has happened to them and so audited financial statements are usually of little to no use for many companies. Financial reports prepared for corporations by accountants, when accurately done and intelligently read, provide those outside the company with the information necessary to decide whether to invest in or to stay away from the corporation. Those reports are the company's CT scans, its X-ray films, its annual physical. When done negligently or fraudulently in material areas, those reports are misleading. And misleading financial statements, like missed diagnoses, can eventually lead to disaster (Bouman, 1998).

Most companies rely on their own internal accountants for this information. Thus, companies are paying twice to get the same information. This is not to say that auditing is primarily a waste of time and money. Audits can uncover very big problem areas in systems. They can also help to improve system controls as well as improvements in security.

Older system documentation methods were fairly secure. Confidential documents were stored in a secure area that not all employees could access. Along those same lines, doors were locked and outsiders could not access critical information. Most computer crimes are committed by people that have more knowledge of security than the system administrators in charge of security.

Using different techniques can enhance security. The use of passwords, security badges, cameras, and guards are some of the physical and non-physical examples of security measures that can be in place. Since most transmissions are made electronically over phone lines or fiber optic means, data encryption can be very important as well (Romney & Steinbart, 1997).

Electronic commerce has changed the way business is performed. Protecting information in this ever changing and expanding market can be very tricky. Encryption, using private communication lines, and other controls, such as batch totals can ensure that the data transmitted is protected and also correct. Although these controls do not give the business 100% assurance that the information is safe and protected, it does ensure a little more reliability in the information. Auditors are continuing many of these techniques and will so in the future. The problem is that many accounting firms do not have the expertise to help their clients implement these new technological security measures and are outsourcing these services. This is a large loss of revenue that accountants could and should tap into.

Continuous auditing is a technique that allows an auditor to gain a reasonable understanding of a client information system over a longer period of time. Most audits are performed at year-end and provide only limited assurance to most accountants that the information provided to them by the company’s management is accurate. There are many different types of continuous auditing, but a ver popular continuous auditing technique of today is one that uses modules that flag certain highly irregular transactions. This allows the accountant the ability to monitor these transactions through the system and ensure that the system is properly processing this information. Continuous auditing has become one of the largest value adding and efficiency areas for auditing firms. With constant monitoring, errors and weaknesses are caught as they occur and thus better information is supplied to the auditor and management on a yearlong basis.

Many companies are now doing business on the Internet. The risks associated with doing business in this medium are very high. The Internet is still widely unregulated and security is very lacking. The auditor needs to evaluate the protection and security measures that are in place (Bollinger, 1998). Companies doing business or communication over the Internet need to have security programs such as Firewalls and anti-virus programs such as McAfee or Norton’s. With these programs in place, outside users (hackers or unauthorized users) will not be allowed to enter and damage/corrupt files and programs. The virus programs help maintain the operating integrity of the system by preventing the corruption or destruction of key files.

The AICPA is assembling a plan that would enable CPA’s to become trained and certified to assess Internet security. Auditing web sites is a very lucrative area since most all businesses are operating on the Internet.

Electronic Data Interchange has allowed many companies to reduce the amount of time and effort necessary to process a single transaction. In the past, a company would send an approved purchase order to a company for a certain amount of goods. This was then entered into the system of the selling company and an accepted purchase agreement was sent to the customer. From here the selling company printed an invoice and pick ticket, a bill of lading, and a shipping report. All of these transactions allow errors to enter the equation. They also add a lot of cost to processes that are not providing any more value to the customer. With EDI, all of these transactions can be made almost instantaneously.

The year 2000 issues are not only incredibly complex they are also very diverse. Many of the newer companies that have started within the last few years have a distinct advantage if they started with year 2000 compliant systems. The older companies are looking at costs of up to $20 million dollars to correct their current systems. If the audit client has not yet made advances towards converting their systems to year 2000 compliant, it is too late. Most of the larger and regional firms have now turned their backs on this problem and now do not want to give any consulting or accreditation to businesses concerning the year 2000 compliance issues. The risk is too high to provide any type of assurance services on these systems (Kelsheimer, 1998).

This area was necessary to get a grasp on the current technologies and ideology that accounting is currently embracing. In order to make an assessment of the information gathered from the interviews, it was necessary to gain an understanding of the current field of auditing and a general view of accounting as a whole. The information was gathered from the leading accounting organizations, from large auditing/accounting firm web sites, from education literature, and from printed publications such as newspapers, magazines, and trade bulletins via the Internet.

Leading Accounting Organizations

Gaining an understanding of the current trends in auditing and accounting was done to assist in the recommendation section of this report. Knowing what accountants are doing to combat the current and obvious information technology encroachment into their field was very important. If the field as a whole is not embracing technology, then there will not be a push by the local and regional firms to get and stay current on new technologies.

Large Accounting/Auditing Firm Web Sites

In order to compare what the regional and local firms are competing against, information was gathered directly from these sites. The larger firms have spent considerable time and capital on these systems and thus are considered to be the leaders/innovators in auditing technologies.

Published Literature

Finding out what has been included in educational textbooks and other learning literature gave some insight to what accountants are teaching their future employees. This review was also concerned with gaining an understanding of much of the latest catch phrases that are floating around in the accounting industry.

Printed Publications

These publications included both trade and non-trade articles. Gaining an understanding of how the technology and techniques were being adopted by the accounting industry was facilitated by this review. Many of the technically inclined firms openly discussed their auditing techniques and technologies on their web sites. The smaller regional and local firms have printed some of their system specifications in trade publications.

Once the background information was gathered, the interview process was started. Since most of the information gathered was published by the accountants that were directly involved in the systems being discussed, it was necessary to gain some primary information. The questions in the interview were open ended and centered around accounting technology with a focus on auditing techniques. Once a documentation of the system was established, then questions about the results were asked.

With the background known concerning what the larger national accounting firms were doing, it was necessary to gain some insight into what the local/regional accountants were doing. Since smaller accounting firms do not have the time or need to publish about their systems and technology uses, personal interviews provided this needed information. Open-ended questions were used regarding technology use and planned implementation.

The research and interviews were performed to see how many of the local and regional accounting firms are changing their computer illiterate history. Since many of the articles were concerned with what was available and not what should be used, a model was developed exclusively for this report.

Since many of the large accounting firms are the innovators to the field, it is obvious that the local and regional firms should be implementing some of these technologies. The larger firms are using systems that tie together all of the software systems that they are using into one suite. This means that the word processing, spreadsheet, e-mail, and scheduling packages are combined, forming one easy to use, graphical interface package. Some of the prevalent features of these packages are data sharing, increased data manipulation, and higher presentation quality. All of these systems store information on CD-ROM for future access (Deloitte & Touche, Web Site).

Another feature that these systems provide allows an auditor to look up information through the company databases concerning accounting issues, tax law, and past year audits. This enables an auditor to access all of the necessary information in less time without leaving the client’s office. This does not necessarily constitute new auditing techniques, but it does enable the audit to be performed much more efficiently. This efficiency results in less audit time, lower cost for the client as well as the auditing firm, and the ability for the accounting firm to provide more extensive consulting services to the client. Most of the larger accounting firms are still using the same auditing techniques that they have for the last 20 years; they are just performing them in a more efficient manner.

The Local/Regional Assessment Model

Current auditing techniques are very similar to those in the past; it is the technology that is making the largest change. Most local/regional accounting firms do not have clients that need highly specific EDI audits or have systems large enough for the auditor to use continuous auditing techniques. Thus the model was geared around increasing audit efficiency for local and regional accounting firms.

This model serves as a general guideline. It is not intended to be a model by which businesses institute technologies; it is meant as a rough measuring stick by which local/regional accounting firms can analyze their technology standards. The three categories are subject to many different variables, but rough guidelines are as follows:

Small Local Firm: Provides mainly tax services – one to three professional staff members (certified public accountants), one central office;

Local/Small Regional: Provides tax, audit, some consulting – four to fifteen professional staff, one to four offices – within fifty miles of each other;

Regional/Large Regional: Provides tax, audit, consulting – twenty and above professional staff, more than three offices – large geographical area.

As the field of accounting moves into the future there needs to be a continuing focus on technology and the true impact that it will continue to have on the field of accounting. Many of the leading accounting organizations have made this their primary concern as they are trying to move accounting into the next century.

Now that accounting has recognized the power of technology the field must continue the efforts to stay current. If the accounting field does not, there is a good chance that the same thing that happened over the last 20 years will happen again. Accountants will become technology incompetent and in today’s environment this could prove to be a fatal blow to the field of accounting.

There are many varying techniques that accountants use to perform audits. These techniques have remained virtually unchanged and for most of the local and regional accounting firms they will for remain unchanged for a while longer. The larger accounting firms are using some of the newest techniques, but for the most part, the entire field of accounting is more or less increasing efficiency and not reinventing the wheel.

There are many opportunities for accountants to step forward and be information specialists. There is also a great opportunity for accountants to continue to add value to client information as well as client processes. The potential for accountants is there. It comes down to whether accounting can embrace something that it has avoided for so many years.

Bouman, Peter H., (1998). Accounting, Auditing, and Financial Malpractice Trial, Vol. 34; Issue 12; Start Page 104ISSN; 00412538.

Bollinger, G., Director of Indiana CPA Society, (April, 1998). Speech presented to upper level accounting classes, Terre Haute, IN.

Bradford, S., Construction Division Manager, Olive Accounting, (November, 1998). Personal Interview, Bloomington, IN.

Deloitte Touche Tohmatsu, (1998, August 8^th). AuditSystem/2 in Action [Site pages], [On-line]. Available: Internet,

www.us.deloitte.com/us/what/serlines/aa/aud_acc/as2act.htm

Kelsheimer, B., Corporate Controller, General Housewares Corporation, (July 1998). Personal interview, Terre Haute, IN.

Mancino, J., (1998). The electronic auditor. Journal of Accountancy, 185 (4), 45-48.

Pearson, M., (1996). Auditing in a paperless environment. Ohio CPA Journal, 55 (3), 31.

Price Waterhouse Coopers Staff (March, 1998). Paperless Auditing. Speech presented for the Beta Alpha Psi regional meeting, Chicago, IL.

Romney, M., Steinbart, P., & Cushing, B. (1997). Accounting Information Systems (7^th ed.). New York: Addison-Wesley.

Svihla, T., Local Certified Public Accountant, Representative for AICPA Vision Project, Svihla & Associates, (November, 1998). Personal Interview, Terre Haute, IN.