THE PITFALLS OF INTERNET FINANCIAL REPORTING
AND THEIR PREVENTION
Yee Boon Foo
The Internet is changing the way business is conducted. Similarly accounting has also
moved into the realm of technology. Companies are venturing online to present their
financial statements and information. By rushing without thinking, companies might
face pitfalls in the Internet financial reporting. This study looks at the potential pitfalls
and the ways to prevent them.
The Internet is changing the way business is conducted. No longer is it a luxury, the
Internet is now a necessity and it keeps on expanding, moving faster and embracing
every aspect of business. One area that is facing the transition is the recording and
reporting of financial and accounting data.
Accounting also has changed, particularly in the last hundred years, from the simple
records of inventory and cash, known commonly as bookkeeping, to the double entry
system of journals and ledgers. The summaries of data in the forms of the profit and
loss statement, the balance sheet, and recently, the cash flow statement, have been the
common reports that companies produced year on year. They provide snapshots of the
state of the companies and are significant sources of information for various
The way accounting data is recorded has evolved. Certainly, it began as numbers
written on paper (or it can be argued as notches in clay, as found in Sumerian
archaeology sites). Till today, in some businesses, numbers are added and subtracted
manually. When computers were introduced, calculations were of course faster, but the
accounting software was usually kept on single computers and not connected to one
another. Data still had to be aggregated from various areas and departments, and
reports had to be printed on reams of paper. With the advent of networking and the
Internet, numbers can be recorded at the moment and place they were produced, such
as at the point of sale, whilst the summarization can happen on a computer miles away.
The financial statements can now be viewed instantaneously on a computer monitor,
and in some instances, on a mobile phone or wireless PDA.
Despite increasing the speed and decreasing the intricacy of accounting, the usage of
the Internet for the reporting of financial data is not free from problems. Sometimes, if
not much care is taken, it continues to produce the same and common accounting errors.
In the rush of bringing in the Internet, the novelty and the fast pace themselves can
cause new complications to arise.
The pitfalls of Internet financial reporting may occur at a variety of areas:
In the objectives of a business for using the Internet for accounting purposes,
In the difference between the way data is recorded previously, whether on paper or
non-connected computers, and subsequently, on the Internet, and
In the very nature of the infrastructure and complexity of the Internet.
Of great interest is to see in which area most problems occur.
Objectives of the Research
With respect to Internet financial reporting, the objectives of this research are:
To look at the reasons why companies decide to report on the Internet, and what
the data are used for,
To study if there are any standards or formats which can be followed and if these
can still be improved,
To look at how and where problems can happen, with emphasis on actual
occurrences of such problems, and
To find ways how they can be prevented from happening, either by avoiding the
same erroneous processes or by formulating new methods of reporting.
Scope of Study
Firstly, this research is covering the areas of the recording of financial data for the
purposes of accounting reports; e-commerce and Internet business will not be covered,
but may be mentioned when the scope includes them. Secondly, in most cases, the
accounting methods under study are following the general accepted accounting
The research will be based on reviews of literature. Due to time constraints, regrettably,
this research will not be collating and examining the large number of actual financial
reports available from the Internet, although a few examples are quoted and some
analyses are mentioned in the references. The research also does not focus on any
particular industry or country.
Survey of Literature
This literature review section looks at eighteen diverse articles and journals. The
following reviews are organized in aspects related to financial reporting, Internet and
standards. The segments are:
Rules of financial and/or Internet reporting
The usage of Internet for reporting
The usage of online financial data
Standards for Internet financial data
The impact of Internet financial reporting
Rules of Financial and/or Internet Reporting
This segment looks at rules that pertain to financial and internet reporting. Although, it
does not necessarily address the detailed topic of online reporting, it however helps to
address issues regarding rules for reporting which in turn can be applied in generating
rules in relation to the Internet.
Brady (2000) looked at the growth of Internet and its governance. The Internet has
developed without a central co-coordinating authority. Parties who wish to intervene
via regulatory supervision include rival businesses, politicians, legal profession and
NGOs. In the first part of Brady’s study, he looked at the impact of e-commerce on
prices, capital, labor and banking. As the Internet is borderless, the bureaucrats are
losing their control on current and future transactions on the Internet. This real free
market is the reason for the concerns on restrictions. In the second part, to illustrate how
difficult it is to limit the Internet, he first explained how the infrastructure of the
Internet is formed. Brady also looked at the history, which began at DARPA. He then
looked at a change of Internet governance where the assignment of domains was at first
a monopoly. In his final part, he argued between the possibility of self-regulation and
the risk of government intervention.
The study is very detailed on the various bodies who wish to regulate, specifically, to
gain more of the share of wealth rather than imposing standards or rules of conduct The
author however did not look into the various NGOs and advocates who wish to keep
the Internet free.
NACEC (North American Commission for Environmental Cooperation) (2003) looked
at the state of environmental information disclosure, particularly in the financial
material information. NACEC argued that it is still an unmet need. The trend to disclose
comes from several factors: the progress of Internet and technology, the increase in the
valuation of a company’s intangible assets, and the risk of loss of reputation. There are
also several bodies in the U.S., Canada and Mexico which mandates environmental
information disclosure, but these are specific to a particular industry. The importance
for environmental reporting is increasing based on an increase in shareholders’
concerns, the recent revelations accounting irregularities and the increase in investors’
desire for transparency in a company. Despite the need, there is still a lack of total
information disclosed as well as formulation of standards of reporting. One aspect that
regulation can be imposed is in the financial report which is regulated to an extent.
Although the lack of enforcement can be seen as a problem, it could also be an
opportunity for new bodies to implement and new standards to be set. The report
concludes with a call of environmental ministries and agencies to work together and
support more active efforts for greater disclosure of data.
The report had listed strong arguments for the need for environmental reporting and
the consequences of non-disclosure. It however, did not mention any non-North
American examples, especially of European ones, where further lessons can be learnt.
Roussey (2000) reflected on the premise that there is a need for global corporate
governance rules. He defined corporate governance as the ethical corporate behavior by
directors or others charged with governance in the creation of wealth for all
stakeholders. This issue has come about because research shows that top management
are involved with a high percentage of financial statement frauds. The author
considered several views for a uniform set of international accounting standards and
international auditing standard.
Therefore, the author reasoned that there should also be a set of international rules for
corporate governance, which can play an increasing role in the war against financial
statement fraud, corruption and money laundering. The author looked at several
existing national standards and rules provided by international bodies. He studied the
initiative of the International Auditing Practices Committee which developed an
International Standard of Auditing, and the issues that arise from it. Finally, he
regarded the new initiative of the Organizations for Economic Cooperation and
Development (OECD) and the World Bank in 1999 to promote improved corporate
governance as a step in the right direction.
The author has managed to make a sound argument for global corporate governance
rules especially as companies are now becoming global organizations.
The Usage of Internet for Reporting
This section looks at the various ways that the Internet or the network is used for
financial and accounting transactions and reporting.
Leahy (2003) looked into business performance management (BPM) software. A
successful implementation of BPM can enhance every area of the organization and can
help to build shareholder value. Two ways that BPM can help are in increasing the
efficiency of the way information is gathered and in enhancing the business processes
by building in better feedback loops. Furthermore, BPM can help to keep profitable
projects going and to manage the companies’ intellectual capital. The author then
illustrated how BPM software can enhance an organization forecasting abilities based
on an example of the improvements achieved by a company with a large employee base
and widely distributed locations. With BPM systems’ what-if scenario capabilities,
companies can also explore opportunities and risks for decision making. In particular, it
is beneficial for merger and acquisition scenarios. At the employee level, BPM can align
the workers’ efforts with the company goals. So good is the benefits of BMP that a
company even reported its usage in its annual report. Leahy then listed the ways BPM
can boost shareholder values:
1. More reliable earnings projections
2. Enhanced what-if capabilities
3. Employees’ clear perception of their contribution to the company
4. Better senior management decisions
5. More accurate evaluations of merger and acquisition opportunities.
The author did not touch on the actual variables that a BPM system would use nor did
he mention the cost of implementing such a system.
McKie (1996) wrote about the way the Internet will revolutionize transaction processing.
Previously, accounting applications have coverage within the intranets and the
accounting department. However, internet accounting is more focused on the
processing and participation in transaction workflows and is extending its reach to
interact with users of the World Wide Web. Applications can now be deployed as
HTML forms or downloadable ‘applets’. This functionality allows users to use their
own standard browser software and participate at every level of the transaction. The
author then looked into the technical steps to implement a Web-enabled accounting
system. E-commerce, which manages the consumer-to-business and business-to-
business transactions, will change the way goods and services are sold. Previously,
electronic data interchange (EDI) was conducted via privately managed value added
networks but with the Internet, proprietary EDI software will no longer be needed. The
author gave a list of several companies who are involved in Internet accounting and
looked at the future changes. There will be development of true extended enterprise
accounting open to various users and a transformation of traditional business processes.
Although the article can be considered dated as today, penetration of Internet is nearly
total, the author has predicted almost correctly changes that have occurred in the areas
of Internet accounting and e-commerce.
Oyelere et al (2003) researched the determinants of Internet financial reporting in New
Zealand companies. Internet financial reporting is a fast growing phenomenon and its
practice by many companies worldwide is growing. However financial statements on
the Internet are unregulated and may need a global regulator to ensure the information
is of the highest quality. The authors argued that using the Internet creates a different
reporting environment to that of the print. The authors first looked at the determinants
of voluntary reporting through traditional media such as print-based annual reports.
From the extensive literature they reviewed, variables that were hypothesized to
influence disclosure include firm size, profitability, listing status, leverage,
internationalization and industry. Applying the same methodology, the authors tested
the hypotheses with New Zealand companies but in relation to Internet financial
reporting. They classified a company as practicing Internet Financial Reporting when it
provides on the web a comprehensive set of financial statements and/or financial
highlights extracted from financial statements. They also looked at the usage of features
that were specific to web sites such as graphics, audio, video and hyperlinks. The nature
of the web to provide real-time data were not used by many of the New Zealand
companies. From the analysis of the results, the authors found that the firm size,
liquidity, industry sector and spread of shareholding are determinants for the New
Zealand companies’ voluntary disclosure via the Internet.
As Internet reporting at this stage is still voluntary, the authors are able to look at
quantifiable factors to test the reasons. However, they did not look at other intangible
factors such as enforcement or marketability as the reason for companies to report on
The Usage of Online Financial Data
This section looks at how financial data is used. From this, the objectives and formats of
the financial data can be further refined for better usage.
McKie (1998) presented the buzzword “reportcasting”, the action of broadcasting the
financial data to the information consumers. He began by describing how initially with
accounting software, production of management information still took time and “reams
paper”. The system then evolved into taking snapshots of the financial reports at a
particular time which can easily be retrieved. Accessing these reports is termed “pull”
reporting. With the advancement of technology, the paradigm changed to “push”,
where data is sent through a channel for consumers to view. The author then detailed
the steps of creating a financial reporting channel, starting from the definition of the
needs, the procurement of the software and the creation of the channel to finally the
start of “reportcasting”. Four important terms were highlighted: “channel”, “polling”,
“publisher” and “subscriber”, and how they are related to the broadcast system. Finally
the author, listed several vendors who sell “reportcasting” software.
The author has given an easy-to-understand procedure, albeit basic, for readers to
consider given “reportcasting” a try.
McKie (1999) looked at the importance aspects of e-reporting. The author first clarified
that e-reporting is not a product but a way of leveraging technology to transform a
time-consuming chore into a more proactive and less paper-intensive automated
He listed four key aspects:
1. Report Initiation. Previously, a financial report was manually initiated but with
automation, reports can be created according to schedule and, although slightly more
difficult, according to predefined business events.
2. Reporting Infrastructure. A new architecture of servers has to be in placed to meet the
demand of creating reports automatically.
3. Report Library Management. A fundamental aspect is that basic data can be stored
and converted to several output formats. These data can also be in different versions to
check for historical data discrepancies. Another benefit for storing these data is that
they can easily be searched and mined for the user’s specific needs.
4. Report Viewing and Publishing. The reports can be in a wider range of output
formats, can have security profiles for different viewers, and can be sent to users via the
Internet or e-mail, either by request or on schedule.
The author lamented that as the time he wrote the article, there is yet to be universal
and standardized e-reporting software. He however has detailed the features that
should e-reporting should have.
Segars (2003) looked at the communication through the internet from top management
regarding crises. The digital media is seen as a quick and effective means to address
structural issues in managing organization crises. The author listed five points of
effective crisis communication:
1. Credibility. The strategic messages must be perceived as focused and realistic whilst
the message writer must be perceived as having integrity and authority.
2. Efficacy. It must be appear through the association that management is in control of
3. Commitment. The management needs to communicate it commitment to its
4. Responsibility. Corporate responsibility messages can create and environment
5. Resolve. The organization must embrace the change proposition and articulate
the course of action.
The author has also depicted examples of poor crisis communication such as Enron. The
author argued that these factors may help to build common dialogue and coordination
among senior management. He however concluded that some messages that have be
relayed but companies are not perceived as intended.
Zaher (1999) looked at the ways to access financial date of the Internet. He lamented
that as a result of budget cuts, vast majority of schools of business must find alternative
low cost sources of data. He mentioned that few studies addressed the uses of the
Internet by practitioners. He gave guidance on where to obtain some of the most useful
financial data sets available on the Internet. In his example, he looked at the Federal
Reserve Bank of Chicago which offers extensive data and macroeconomic variables.
Firstly, he explained which link on the home page the user has to click on to get to the
financial data sets. Then he demonstrated how easy it is to download financial data in
the form of a zipped text file at no cost. The author stated that there are numerous sets
of current (2-4 years) and historical (10-45 years) data at several financial sites, such as
interest rates and exchange rates.
The author mentioned that locating and downloading a particular set of data can be
challenging. He however only listed the types of financial data available from several
Federal Reserve Banks.
Standards for Internet Financial Data
This section looks at the standards that may impact the way financial data is reported
on the Internet.
Leahy (2002) reviewed the emergence of extensible business reporting language (XBRL).
He first explained in the current way, data that a user wanted to look at has been sifted
from stacks of reports and are not in the user’s choice of format. XBRL will improve the
speed, efficiency and reliability of the exchange of information via the internet. In XBRL,
each element of data has tags which in turn can be recognized by compliant
applications. The impact of XBRL includes an increase of transparency from
standardized distribution and a reduction of the cost of assessing information. There
will be cheaper and faster analysis of data. The effort to mainstream XBRL is
spearheaded by AICPA and FASB in the U.S. Other countries are developing their won
XBRL favors to match their own standards. The most significant usage of XBRL is in
Australia, particularly due to the government’s requirement that all banks adopt XBRL.
The author then wrote on the extent of adoption and usage of XBRL in the U.S. Part of
the reason for slow adoption is the incomplete formulation of the specifications as well
as the potential of propriety solution from the IRS. Reuter’s, although British based, has
successfully implemented the use of XBRL, and noted the savings of time. The author
expected that XBRL will evolve in spurts and spatters, and that the most likely adopters
are those in the financial services area.
Although this article was written in 2002, it still partly valid today as the adoption of
XBRL is still small. The author has managed to document the emergence well.
Lymer and Debreceny (2003) reported that the use of the Internet for financial reporting
is a well established activity in many countries that have developed securities markets.
Corporations are putting up web sites that include an investor relations component.
Investors rely on web site for financial statements and other information. The authors
addressed the role of the audit function with regards to Internet financial reporting.
They reviewed the guidance provided which they find not able to respond to current
and future Internet technologies. They also look at user interaction and implications of
new information technologies such as XBRL. Finally they called standard settings and
technology solutions for Internet financial reporting.
The authors have provided a very comprehensive study with analyses of the Internet
financial reporting of companies in major markets. Their methodology could provide a
good structure for future studies.
The Impact of Internet Financial Reporting
This sections looks at the advantages and disadvantages that arise from reporting
financial data online.
GTNews and HSBC (2003) conducted a survey asking organizations whether security
concerns prevented tem from using the internet for financial transactions or reporting.
The results showed that 3 out of 4 corporations do not regard it as a barrier. Those
based in the Asia-Pacific however were most concerned and regard it as an obstacle.
This simple poll has shown that the internet is no longer a main worry for companies to
venture for financial reporting.
Leahy (2000) analyzed the impact of reporting online. He described how e-reporting
software is a hot market for growth and investment. The number one reason for e-
reporting is speed, which helps to save time and money, and improves information
flow throughout the organization. There is a reduction and elimination of manual
reports and an increase of speed of delivery. The monetary and time impact is backed
by studies, where it has been shown that improvements can be more than double. E-
reporting leads to better analysis of data and less meetings where everyone is required
to attend. However, e-reporting does not necessarily mean a paperless business
environment, although there are savings from better printer management. The author
then proceeded to list implementation issues, which include planning, talking to
potential users and formatting of information. Time is taken to coordinate these steps
and should not be rushed. Although the reports are accessible to everyone, the data
might not be understood. Leahy then concluded with any example of an e-reporting
initiative by a bank which improved their response to the customer’s needs. As a
sidebar, the author touched upon the advancement in e-financial reporting in the form
of extensible business reporting language (XBRL).
In the article, the author has listed various examples of businesses adopting e-reporting,
some together with the cost of implementation. He however did not go into detail on
the various types of reporting formats or software adopted, or the impact of e-reporting
on their competitors.
Leahy (2001) categorized several pitfalls of using technology for consolidation and
reporting. He listed them as:
1. Letting the tail wag the dog.
2. Becoming infected with bad data.
3. Succumbing to merger incompatibility.
4. Consolidating far-flung business units.
5. Agreeing on a common financial model.
6. Getting people to use the new system.
7. Dealing with debits that aren’t really debits.
8. Integrating e-business information.
9. Trying to do too much for too little in return.
10. Putting the cart before the horse.
In each item, he illustrated actual examples from the business world. In most of these
cases, the objectives of the company to use technology had not been thoroughly
scrutinized, especially to fit their basic needs and situation. As a sidebar, he looked at
strategic performance management (SPM) systems, which, among other challenges,
tend to focus on financial rather than strategic objectives.
Although the author has categorized these pitfalls, he did not list them systematically
nor did he explain how they can be successfully avoided.
Leahy (2004) wrote about the way technology has enabled CFOs to become analysts and
strategists. He began with several examples of finance managers who experienced the
change of their role because of the use of technology. The most critical resource that
technology has empowered finance is time. With new tools, finance executives can
spend more time analyzing. CFO’s have enhanced their value and become strategic
players in the organization.
The author then related the history of technology breakthroughs in the financial sector.
Accounting began with bare-bones software with evolved to enterprise resource
(ERP) system in the early 90’s. In the mid-90’s, business intelligence (BI) software was
introduced and around 2000, business performance management (BPM) systems were
adopted. The impact of new technologies affects every corner of the finance department,
including tax management, credit management and the treasury function. The finance
executives have taken on more responsibility, not only in creating forecast, but to
overseeing and integrating them. However, with the new technologies, executives need
to have a solid understanding to them. The finance managers will then have to set up
the right processes and get people to focus on the right tasks.
The author has managed to summarize the impact of technology on financial employees
McKie (2000) reported on the advantages and disadvantages of online accounting.
Companies are now able to subscribe to a Web-based accounting service rather than
buying a software package. The target at the moment is smaller organizations, because
large companies usually require heavy multi-currency functions and reporting. The
advantages of online accounting include no need for extra infrastructure or resources,
accessible anytime and anywhere, no worries of upgrades or backups, comprehensive
online help, ease in subscription and registration, ease in importing data and low cost.
Disadvantages include possibility of hacking, problems due to poor internet connection,
poor functionality of software and low customization. The author then explained how a
company should evaluated the need for online accounting services, looking into aspects
of formats, interface user ability, service level agreement and quality of support. As
most vendors offer a free trial, the author recommended that organizations “try before
you buy”. Internet based-accounting could also provide other online features such as
The author has given a quick overview for companies to evaluate if online accounting is
suitable for them.
Pike and Lanis (2003) identified a possible relation between an attestation service for
web sites and the potential misleading effect it can generate. They specifically looked at
the WebTrust seal which is designed to symbolize that a CPA or Chartered Accountant
has appraised the web site’s basic practices and controls. Before the internet, firms
which publish printed financial reports have their data audited and verified by auditors.
Therefore the credibility of the data is perceived to be strong. Firms publish their data
on the internet can in the same manner get certification with the WebTrust logo.
However, not all pages on the web site will be accredited. Thus, when firms publish
information with the WebTrust logo, they have increased their perceived credibility
even if they hyperlink information on that page to unaudited information elsewhere.
The authors also looked at the potential of misuse and abuse of data both by the
organizations that put them out and users that view them, because of the lack of
guidelines for displaying financial data. The authors based several hypotheses to test
the usage of the WebTrust logo, based on the theoretical framework proposal of Hodge
(2001) which tested print data against online data credibility. The authors expected that
users do assess information as more credible in the presence of the logo. However,
users may have a potential to misclassify other information if there is a hyperlink to a
page with no such logo, i.e. unaudited data. Therefore the presence of the WebTrust
logo gives the ability to the companies to mislead users. The authors called for
additional WebTrust criteria, introduction by regulatory bodies of a mandatory regime
for financial disclosures on the Internet and stakeholders to alert if pitfalls of
hyperlinked documents are found.
The authors did not conduct a comprehensive study to test their theories. Furthermore,
other standards of internet security or formats were discussed by the authors.
Based on the literature, the pitfalls of Internet Financial Reporting (IFR) can occur at
several stages. This is depicted in the research framework given below.
IFR begins at the formation of the reasons for putting up the financial reports on the
Internet. From here, there are two factors to look into, the format of the data that is
placed on the Internet, and the technology and systems used to enter, calculate and
present it to the users. When the user receives the financial data, he is then able to
utilize the data for specific financial purposes, such as calculating the company’s
financial standing. How the user utilizes the data will also feedback to the company’s
objectives of IFR. Pitfalls can be found in the objective, data, system and usage stages.
Discussion, Analysis and Finding
In any business venture, project or plan, objectives must be set (Leahy, 2000). Typically,
objectives should follow the SMART rule: Specific, Measurable, Achievable, Realistic
and Time-based. In the matter of IFR, objectives can immediately fail if the company
has either a wrong objective or none at all.
The most common mistake that a company makes for IFR is to follow the crowd. Every
person and his pet has an internet web site, and companies tend to follow just to have a
presence without looking into why they are going online (Leahy, 2001). Because stock
and share prices are now available online, companies expect to put out the data to
please the public. By placing the data without any thought, inconsistencies and risks
can be found in the data.
There could also be a case where companies put up incomplete or misleading data for
various reasons such as increasing the share price. This of course is illegal, and
watchdogs and shareholders should be on a look out for this. When companies do not
disclose the required data, this is a sign of problem.
Finally, companies might just put the data online without any reason. Putting up the
financial data can just be a superficial move because the company thinks that the data
can just be copied from the printed financial reports. The only purpose it serves if those
users can easily obtain the data, however, in some cases, the files can be large in relation
to the multi-page reports they usually come from.
Therefore, to prevent the pitfalls at the objective stage, the company must first have its
objectives straight (McKie, 1999; Oyelere et al, 2003). The data should not be a facsimile
of the printed reports. In some countries, there are legal requirements which need to be
followed and can serve as a guide for IFR. Most importantly, the reason for data
disclosure is to display transparency of the company in its dealings and accounts.
Data & Formats
IFR need not necessarily mean just numbers on balance sheets and income statements.
Similar to an annual report, the data can include other financial dealings as well as
statements of business actions. With the data, the pitfalls can occur in the content and
the format it comes in.
The problems with the content of the data can easily be overcome by following the
standard regulations of accounting and auditing (Roussey, 2000). At this stage, there is
no difference to the content required for printed and online data. The Internet however
allows the data to be updated promptly. In some cases, extra data such as
environmental reporting are required to be reported (NACEC, 2003). Only if the
company declares less than required, should the users be wary of it.
In terms of format, the data display has gone through various incarnations (Lymer and
Debreceny, 2003). Initially, data are given in HTML or Adobe Acrobat format which
tend to be static. Then the user could interact with the data by choosing a selection of
data. Later on, the data were enhanced and users could choose a variety of formats. This
method is however still lacking. Companies who expect data still be displayed this way
would lead to another pitfall in reporting.
With the introduction of eXtensible Business Reporting Language, financial data can be
used in variety of ways (Leahy, 2002). At the basic level, the financial data are just
numbers in a text file, but each item has a tag associated with it. With XBRL software,
the data can be formulated and analyzed into whatever report formats the users require.
XBRL is now at version 2.0 but still in the process of formulation (http://www.xbrl.org).
Despite this, companies can start using the uploading the data with XBRL tags. XBRL
does not have a strong security feature yet, but is planned and it can be taken to several
stages, from basic encryption to certified and audited data, which avoids uncertainty
Several companies have placed their financial data in the XBRL format, for example,
Microsoft (http://www.microsoft.com, examples of XBRL data in appendix). Although
the standard is young, it looks like it will be the de facto format for Internet Financial
Technology & Systems
The use of computers, networks and the Internet does necessitate adoption of new
technology. New businesses today, with young managers and executives, should not
have a problem with Information Technology, as they are used to it in their daily life.
Security may be a concern for some (GTNews, 2003). However, computerized
accounting systems do pose a problem as they cover a unique corner of the IT
Companies might be tempted to implement proprietary systems and/or software for
the purpose of moving from the pencil based ledger system to online accounting. Here
the danger is that the amount of money and resources can be substantial and not
justifiable with the advantages (McKie, 2000). Companies should be wary of non-open
systems because there are alternatives that can use the simple PC
(http://www.myob.org). Companies may not be sure how to upload the data so that
they are available on the internet. Some may need to purchase different software
because their current system does not have the functionality to do so.
Finally, the company needs to train their staff to use the software. There will be a harder
learning curve if the software does not have a similar user interface to the ones the staff
is used to. The software also needs to come with strong, ready and continuous support.
Therefore, to avoid pitfall of using the wrong system or paying too much, the company
should plan the implementation of acquiring new technology and systems. It should
not only take account of the changes in the immediate future such as purchase price and
staff training, but also future implications such as upgrade, new standards and
hardware changes (Leahy, 2004).
The purpose of putting up the financial data is certainly to be viewed by the users, in
particular, the stakeholders such as shareholders and investors. In the same way
printed reports are viewed, users would not just take the numbers at their face value,
but will attempt to analyze the data in depth. With the advent of the computer, the
calculation can be faster, and if the data themselves are extractable, instantaneous
reports can be arranged. The company should not presume that users do not want to
have financial data available (Zaher, 1999).
The pitfalls that the users faces usually arise if there already snags in the three stages.
For example, if the company has a misleading objective, then the data could be incorrect.
If the data format is not according to standard, the users are not able to apply them. If
the systems operated are proprietary, the users themselves might not be able to assess
The company should therefore thrive to ensure that the data reaches the users in the
fastest and effective way. Following the standard format must be a prerequisite. In
some companies, e.g. Microsoft, data are also given in spreadsheets which allow users
to manipulate and adjust to their hearts’ content.
Secondly, the company should also ensure the data are correct and if possible, are from
the certified financial audit. Having some of the data certified is not enough as it can
mislead the users (Pike and Lanis, 2003).
As has been pictured, the reasons and ways the users apply the financial data will give
a clearer picture for the objectives that a company decides to present Internet Financial
Given the brief time and the limited availability of literature, the pitfalls of Internet
Financial Reporting cannot be comprehensively detailed and researched. It would be
beneficial to conduct a survey of the various ways companies, particularly in the
Malaysian or Asian region report the financial standings on the Internet. Furthermore,
whether these data are utilized or even viewed can questions for further research. This
subject will continue to be relevant and exciting as more companies venture into the
cyberspace and into new markets, and more people hook up into the Internet via new
Companies are undertaking the Internet for their financial reports. They will face
several pitfalls, particularly if the objectives are not well set-out, if the data is wrongly
formatted, if the system is flawed and if the users are not able to use the data. It is
however getting to be a necessity rather than a substitute. Therefore, to increase the
transparency to the stakeholders, companies must plan carefully before they can
successfully impalement Internet Financial Reporting.
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