Should the Society Establish an Information Technology Accounting and Auditing Committee?

A Task Force Could Decide

By Bruce H. Nearon

A small group of CPAs from high-tech firms and Internet-based companies last year grew skeptical about the scope of the Emerging Technologies (ET) Committee, prompting members to consider spinning off a new committee specifically devoted to information technology accounting and auditing.

During committee meetings, members suggested the establishment of an Information Technology Accounting and Auditing Task Force to explore whether there was enough interest among the New York State Society of CPAs (NYSSCPA) membership to justify launching such a committee.

The idea for the task force came about last year when a few members and prospective members seemed to lose interest in the subject matter covered by the ET Committee.

One of these members joined the ET Committee in 2000 expecting its membership to include other CPAs in high-tech industries and some discussion on issues important to her field, such as accounting treatment and disclosure unique to high-tech companies.
The member hoped to meet accountants from other Internet firms and information technology (IT) companies as well as their auditors, and suggested reaching out to Big Five managing partners and high-tech chief financial officers to widen the ET Committee’s membership and increase its expertise and experience with high-tech issues. The member expressed concern that the committee did not discuss topics of interest to some CPAs in high-tech industries.

A second committee member was less than satisfied with the ET Committee’s discussions, saying he did not find the content of one meeting useful to his work in high-tech accounting treatment and disclosure.

A prospective ET Committee member declined to join the committee after sitting in on one meeting, only to find the discussion topics and the committee’s general aim of little interest. The prospective member’s interest in accounting and finance for IT companies concerned topics that historically have not been discussed at the ET Committee meetings.

When I joined the ET Committee, I expected that IT accounting and auditing issues would be discussed; however, that has not happened. Committee discussions usually center on IT consulting and CPA firm IT practice management, and always seem to drift back toward small-firm IT consulting. There also exists an Information Technology Committee at the NYSSCPA; however, I do not believe they have discussed IT A&A, or expect to.

I also sit on the Audit Standards and Procedures Committee, and we rarely discuss IT A&A issues. Given the background of the committee members, IT auditing issues have focused more on general issues rather than specific IT audit technical matters. I expect that situation is the same for the various accounting committees.

The bottom line is that the NYSSCPA does not have a committee dedicated to IT A&A.

Is there a need for such a committee? Maybe. Maybe not. But perhaps there could be an IT A&A task force that could thrash this issue out and decide. Charter membership in the task force would be offered to the three members previously mentioned who didn’t find the ET Committee useful for their practice interests, as well as one member from the ET committee, one member from the IT committee, and one member each from the various audit and accounting committees.

The mission of the proposed task force would be to decide if there are enough IT A&A issues and enough potential member interest to justify a permanent committee. The type of issues that could be discussed include accounting treatment; practices and disclosures unique to high-tech industries; computerized accounting and auditing techniques (CAAT); general and application controls; and the Financial Accounting Standards Board’s (FASB) new intangible asset and performance measurement reporting project. If the task force members deemed it appropriate, they could publish their proceedings and write articles for the Society’s weekly e-zine publication, The Trusted Professional, The CPA Journal, or the NYSSCPA website, as well as consider an IT A&A conference.

I would be interested in hearing from other members regarding their thoughts on forming an IT Accounting and Auditing Task Force. You can contact me by phone at (973) 403-6955 or by e-mail at bnearon@jhcohn.com.