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Catching the Wave, a Good Ride, or a Wipeout?
Electronic commerce (the purchase of goods and services over the Internet's World Wide Web) is expected to explode over the next three to five years and profoundly change the way goods and services are bought and sold by consumers and business alike. This article addresses major e-commerce opportunities and challenges for CPAs in practice and industry and explores the dangers for CPAs, their clients, and companies who remain unprepared. The article also describes the exciting opportunity for CPAs to provide the new AICPA WebTrustSM service. To help get started, the sidebars identify educational resources and describe affordable approaches for even the smallest companies to establish a complete e-commerce presence.
he U.S. economy is poised for the geometric growth of electronic commerce to have a profound effect on the way business is transacted. For the purposes of this discussion, electronic commerce (or e-commerce) is defined as the purchase and sale of goods and services over the Internet's World Wide Web. According to private sector forecasts contained in a major U.S. Department of Commerce report entitled The Emerging Digital Economy, business-to-business e-commerce will reach $300 billion by 2002. The conservative estimate for retail sales is $7 billion by the year 2000, with some respected analysts predicting upwards of $100 billion over the next five to eight years (report pages 21 and 38). This revolutionary way of doing business will provide CPAs in practice and industry with major opportunities and technical challenges. For many companies of all sizes, utilizing e-commerce will become a matter of survival.
Most elements of e-commerce transactions, from ordering to fulfillment, are conducted electronically. CPAs whose clients and companies engage in e-commerce will need a working knowledge of related hardware, software, and communications technology. CPAs involved with financial statements must understand how transactions are processed and secured through electronic web-based systems, both to prepare and audit financial statements and to understand the financial control structure. The additional knowledge required by CPAs is a natural extension of existing competencies and can be readily learned.
CPAs who take the initiative have an important business consulting role to play, helping their clients and companies establish a successful e-commerce presence. There are also exciting opportunities for CPAs in public practice to become key players in the e-commerce infrastructure, by providing the new AICPA WebTrustSM assurance service and for those in industry to help their companies prepare for these engagements. The WebTrust seal is being adopted by CPAs and their Chartered Accountant counterparts around the world. It provides assurance that client websites meet high standards of business practice disclosure, transaction integrity, privacy, and security. CPAs whose clients and companies are not yet contemplating e-commerce have a vital role to play in alerting management to the competitive implications.
The Risk of Ignorance
Those who ignore e-commerce may find themselves overwhelmed. This author's interest in the broad impact of business technology began in the 1960s when a successful client, who was highly dependent on long-distance phone lines, went bankrupt following AT&T's introduction of toll-free (800) numbers. The bankruptcy was solely due to the owner's failure to understand and prepare for this new technology. For many companies, especially small businesses, e-commerce has the potential to be their 800 number. Though some do not believe that e-commerce will gain widespread acceptance, this is an increasingly risky point of view. If the geometric near-term (two to five years) growth predictions fail to materialize, the cost of getting ready will be relatively small. However, if they come to fruition as expected, unprepared companies may find it difficult or even impossible to catch-up.
Telecommunications companies--wireless, satellite and land-based, cable-TV providers, electric utilities, and others--are racing to build the e-commerce communications infrastructure. Along with computer hardware manufacturers, software developers, and merchants who want to sell over the Web, hundreds of billions of dollars are being invested to develop a secure and profitable overall e-commerce infrastructure, often referred to as the "information superhighway."
Even at the current stage of development, Dell Computer, Cisco Systems, GE, and a variety of other large and small companies are finding gold on the Internet. Amazon Books & Music (www.amazon.com) is well positioned to become a major consumer force on the web, moving well beyond its base as a