Accounting Profession and Web Assurance Service

Transcription

1 Accounting Profession and Web Assurance Service Mohamed M. El-Dyasty Department of Accounting Faculty of Commerce Mansoura University Mansoura EGYPT 2004

2 Accounting Profession and Web Assurance Service 1. INTRODUCTION As a result of advanced communications means and computer technology, E commerce transactions volume is grown up. So, Internet's users increased and firms that prefer to deal with its customers through online transactions are augmented. But, Transactions volume via Internet is not reached the expectations. Customers feel worry and fear to expose to fraud and misuse their private information. To overcome this problem, some organizations established to provide trust in E commerce transactions through what is known as Web Assurance service. These organizations provide services resemble what is known in accounting arena as Assurance Services which provided by auditing firms. American institute of Certified Accountants (AICPA) and Canadian Institute of Charted Accountants (CICA) adopted and executed a joint project to create a new assurance service in order to provide trust in E commerce transactions. That service known as WebTrust. Thus, accountants entered a new environment of hard competition to increase their revenues and compensate slow growth of their traditional services like financial statements audits. Unfortunately, WebTrust is not growing as expected. Competitors prevailed and their brands became more popular in E commerce filed. So, many accounting studies are devoted to evaluate WebTrust and explore possibilities of improvements. Also, AICPA/CICA made some changes on the principles and criteria of WebTrust in order to enhance accountants' competitive position in E commerce filed. Thus, this study has two objectives. The first objective is to illustrate the need of trust in E commerce transactions and nature of web assurance seals. The second objective is to discuss Web assurance research and draw conclusions. The remainder of this paper is organized into four sections. Section two discusses the need of trust in E commerce. Section three presents the nature of web assurance seals. Section four is devoted to Web assurance research. Finally, section five provides summary and conclusion. 2. THE NEED OF TRUST IN E COMMERCE E commerce comprises both people and organization engaging in transactions without paper documents though computers and telecommunications networks [AICPA/CICA (2000)]. There are two types of E commerce transactions [Belanger et al. (2002); Romney and Steinbart (2000)]. The first type is known as Business to consumer transactions. In this type, consumer visit the seller's website in the Internet, recognize products, fill in online purchasing orders, and pay money at the time the sale occurs via credit cards. The other type is known as Business to business transactions. This type includes transactions between business firms and each others (e.g., transactions between car manufacturer and vendors that produce car seats). E commerce transactions provide many benefits to sellers/ producers and consumers. The most important benefits encompasses [Romney and Steinbart (2000); Cashell and Aldhizer (1999)]:

3 Consumer could communicate to seller/ producer websites from any place in the world. Thus, consumers' numbers that seller/ producer could deal with may increase and sales volume will grow up compared with traditional means of selling. Improving processing efficiency by use of all available internets' communications means in order to accomplish business inside firm in general, and in firm that have different branches in the same country or throughout world in specific. This will increase quality of goods and services and raise sales volume. Sellers may avoid restricting a great part of capital in inventory, either in storing capabilities or in huge volume of goods. Many sellers involved in E commerce transactions virtually purchases goods after receiving consumers' purchase orders. Enhancing post sale services as a result of high speed communications between seller/ producer and consumer either through Internet or e mail. Consumers could quickly reach a great deal of products and options. Thus, they could compare prices at many websites without leaving their place. So, they could pick the appropriate product. In addition to displaying and distributing products and services, some consults and business solutions may be presented. But, business to consumer transactions bears so many risks (fears) because of lacking personal communication between seller/ producer and consumer. Most important risks may include [Tribunella (2002), Lambert (2002), Mauldin and Arunachalam (2001)]: Privacy risk. The risk that personal and secret information of consumer will be misused by the seller. Security risk. The risk of not transmitting information over a public medium, such as Internet, in an intact way and free from unauthorized access and use. Transaction risk. The risk that the seller will not completing purchase transaction according to what agreed upon. Disclosure risk. The risk of dealing with anonymity site over the internet. This risk raises the possibility of distorting information or not revealing complete information that the consumer need, by the firm owned the site, to make fully informed purchasing decision. Producer risk. The risk of not finding appropriate information about product and seller that could meet consumer's needs. To help consumers to control or reduce pervious risks, a new service emerged to assure trust of E commerce transactions. There are two types of this service [Mauldin and Arunachalam (2001)]. The first type could be accomplished via putting a seal or insignia on site to declare that the seller will comply with prescribed criteria of the organization that provide the seal. That organization is an independent party, such as AICPA and CICA. Under the second type, a third party provides assurance to consumers to trust the site without placing seal. VISA is one of these type providers.

4 In the remainder of this paper, I will focus on providing trust via placing seal on seller's site. This type is more popular and is the form that selected by the accounting profession to provide assurance to trust of E commerce transactions. 3. NATURE OF WEB ASSURANCE SEALS Currently, there are different organizations which their main business is to provide trust in E commerce transactions through web assurance seals. I will concentrate on three of them only. These are the most popular [Cashell and Aldhizer (1999)], which are Council of Better Business Bureaus [provide BBBonline seal], TRUSTe organization [provide TRUSTe seal], and AICPA/CICA [provide Web Assurance seal]. The following subsections will present a brief description of the three seal. 3.1 BBBonline seal 1 BBBonline seal is provided by a subsidiary of the Council of Better Business Bureaus. The mission of BBBonline is to assure trust in Internet through a privacy seal program. This program allows the Internet sites to display a seal as soon as they have been evaluated and after ascertain of its compliance with the program requirement. Many big organizations, like IBM, Intel, Microsoft, And AT&T sponsored BBBonline program. The program main objective is to inform consumers that the seller value their personal information. That thing is explicated via displaying assurance seal and reporting a privacy policy that it is easy to locate and understand. Firms that obtain BBBonline seal have easily the opportunity to differentiate themselves from other firms. The name and reputation of Council of Better Business Bureaus are well known through worldwide. In order to have BBBonline seal, there are some requirements that should be fulfilled, these are: threshold requirements, privacy notice requirements, sharing information, choice and consent, access and correction, and additional staff determinations. 3.2 TRUSTe seal 2 TRUSTe is a nonprofit privacy initiative dedicated to construct trust in internet and accelerating the growth of its industry. TRUSTe offers a program to provide assurance seal in order to diminish consumer's concerns regarding their information dealt with over Internet. This program is designed to provide assurance concerning the credibility of Internet's sites through multi-faceted transactions. So, consumers fell secure to make purchasing decisions and give their personal information. Privacy seal is the program's cornerstone. That seal, lead consumers directly to the seller's privacy statement and is giving only to Internet's sites that comply to privacy criteria, which are disclosure, choice, selection, access, and security. Also, Internet's sites that display TRUSTe privacy seal should comply with continuous supervision and dispute resolutions process of TRUSTe. (1) (2)

5 TRUSTe has its specific principles of privacy. These are adopting and implementing privacy policy encompass objectives of seller and consumer concerns about sharing of personal information obtained online, disclosing practices of collecting and using information classified as personally identifiable information in privacy statement, giving consumers choice and consent of how to use and share their personally identifiable information, and executing criteria about Information security, quality, and access in order to safeguard, update, correct personally identifiable information. 3.3 WebTrust seal 3 Two bodies responsible for setting standards in accounting profession decided to design and implement a joint program in order to reduce concerns regarding E commerce transactions. The program called WebTrust. The objective is to build up E commerce criteria to enhance security of the personally identifiable information. Accountants could be licensed to provide WebTrust seal from AICPA or CICA. After that, they are qualified to test and evaluate whether the Internet's site comply with principles and criteria of privacy developed by WebTrust Program. WebTrust seal is a symbol to point out that the accountant verified privacy practices disclosed by the seller and related controls. The seal also revealed that a qualified opinion has been issued regarding these practices and techniques. Virtually, the accountant's report provide an opinion, in all material respects, that seller: (1) disclosed its privacy practices about E commerce transactions, (2) has the intention to comply with these practices, (3) adopted effective controls that provide reasonable assurance to protect personally identifiable information obtained in E commerce transactions in conformity with privacy practices disclosed. WebTrust has five principles and criteria. These are: privacy, security, business practices and transaction integrity, availability, and WebTrust for certification authorities. At the end of this section, it should be stated that TRUSTe was the first to enter web assurance market( founded in 1997), BBBonline is the next ( founded in 1999), and WebTrust is last seal to found ( in 2000, see ). Some researchers consider WebTrust as the most comprehensive program of the three [Cashell and Aldhizer (1999)]. Finally for Internet sites seeking for assurance seals, WebTrust cost is the greater, TRUSTE comes next, and BBBonline cost is the smaller among the three programs [Jamal et al. (2002]. 4. WEB ASSURANCE RESEARCH 4.1 Research findings Table 1 presents summary to studies dealing with web assurance. Researchers use different methods to reach conclusions regarding web assurance services. The main concern of this research is to explore perceptions of Internet users of assurance seals and understand their expectations, intents, and decisions in relation to online purchasing. (3) see; AICPA/CICA (2000),

6 Table 1 Summery of web assurance Research Study Method Main Results Cashell and Aldhizer (1999) Houston and Taylor (1999) Portz et al. (1999) Historical Analytical Internal auditors of organizations that have activities in E commerce should encourage their companies to get assurance seals to mitigate consumers concerns regarding security of information transmitted over the Internet and their business legitimacy. Contrary to stated goals, WebTrust is not providing additional assurance regarding business and security practices in addition to what disclosed through company's site. So, sites could get assurance via what they disclose not through assurance provided by a third party. Subjects wrongly perceived that product quality is higher when sites display WebTrust seals. People do not will to purchase more from sites that display WebTrust seal, comparing to sites that display only its business and security practices. Product quality is an important determinant of purchasing willingness. But, business and security practices are not so important in this regard. There is expectation gab between targeted assurance of WebTrust and what consumers think regarding what they should have from WebTrust. Relatively, few subjects decide to click on assurance seal to know more about its implication. Results suggests that user decide to click on assurance seal did not have more accurate impression regarding trust. There is only a slight difference in average percentages of users who understand correctly sellers' business and security practices or those who understand role of assurance seal in assuring process integrity or information protection. Thus, the hypothesis of clicking on seal will make consumer understand better assurance seal is not supported. So, clicking on seal is not result in more informed users. Across all users, there are mixed results regarding message that user's get about nature of assurance seal. In some cases, seal provide good impression about purpose of trust service regardless of clicking on it or not. Results suggested that users overestimate protection degree against fraud that assurance seal offers.

7 Table 1 [ continued ] Study Method Main Results Gray and Gray (1999) Portz et al. (2000) Hunton et al. (2000) Kovar et al. (2000a) Historical Survey/ Analytical Internal auditors should advice their organizations to benefit from assurance seals. They must prepare to subscribe in assurance seals and participate in following-up and extension process that aim to use panicles and criteria of trust services. Subjects do not understand correctly the concepts of business practices and process integrity and consumers' perception of these two principles of WebTrust is inaccurate. Privacy and information protection are so important issues to Internet users and understood will by them. They affect consumers' decisions to buy online. Financial analysts do not have prior knowledge of WebTrust assurance service. Financial analysts think that WebAssurance seal will be valuable to consumers in the areas of business practices and disclosure, transaction integrity, information protection, privacy. Seller that place WebTrust seal will earn more sales revenue and enhance its competitive position. Financial analysts thought that a firm announcement regarding issuance of WebTrust seal as a positive economic signal. The announcement of web assurance will yield a greater positive impact on earnings forecasts and stock price estimates for high risk firms than low risk firms. Attention to the WebTrust seal and general attitudes toward online transactions are significantly affected by online transaction expectations for a web site. Attention to the WebTrust seal and the likelihood of online purchasing have direct effects on consumer intent to purchase online. Assurance seal should display in an explicit way. Consumers refer to other important factors that could be determinants of their decision to purchase online. These are low information security, prior experience of online purchasing, desire for personal contact, perceived convenience, and perception of web site creditability.

8 Table 1 [ continued ] Study Method Main Results Kovar et al. (2000b) Mauldin and Arunachalam (2001) Lambert (2002) Odom et al. (2002) Lala et al.(2002) Analytical Case study Survey/ Expectations and intention to purchase online are affected by whether consumer notices WebTrust seal. Seeing WebTrust certificate has a significant and positive effect on the intention to purchase online. Those who previously experienced WebTrust seal have higher online expectations and a more likely to purchase online. Higher intent to purchase online is associated only with web assurance when consumer could not notice the disclosure of seller and product familiarity is low. But, if consumer notices the disclosure of seller, there is no significant association between intent to purchase and web assurance. Also, there is no association between familiarity with seller and information risk and intent to purchase. However, there is significant association between high purchasing intention and ease of web site usage, general intent to purchase online, and web site design. The use of principles and criteria prepared by AICPA to achieve privacy and security requirements will provide good controls to sellers in E commerce environment. There are seven specific concerns to consumers that purchase online. These are transactions security, consumer support, product or services quality, firm legitimacy, price, privacy, and documentation. These concerns are classified through factor analysis into two dimensions. The first one is related to company and the second is related to technology. Big names of web assurance providers only deal with a small aspect of consumers concerns and fears. There is a gap between what online consumers need to assure about and what offered via web assurance seals. Online consumer decisions are affected by recognition and familiarity of web assurance seals. Consumers are able to distinguish between different levels of information quality provided by different assurance seals. WebTrust could have marketable advantage over all web assurance seals and accounting profession needs to better market the advantage of WebTrust seal.

9 Table 1 [ continued ] Study Method Main Results Jamal et al. (2002) Jamal and Maier (2002) Kaplan and Nieschwietz (2003) Analytical Historical Model Building Although there is no governmental regulation, aspects of E commerce disclosure and market of assurance seals grow up in an orderly way. Accountants did not earn a good position in web assurance market. Other assurance seals providers offer better criteria for web assurance. Despite great investments in money and time, WebTrust did not attain commercial success. High quality of privacy policies and disclosures practices of competitors suggests there is a little chance for accounting firms to develop higher privacy disclosure standards or compliance practices. Trust formation is an important matter to understand web assurance service. Trust has significant effect on purchasing willingness and perceived quality. Web assurance providers should concentrate more on assurance that they grant than their personal attributes, because assurance is the important factor of consumer's behavior. Results validate association between web seals and improve expectations about quality. That matter is applied to all web assurance seals, not just WebTrust. 4.2 Discussion WebTrust research is a relatively new is in accounting domain aims mainly to investigate users' perception of web assurance services and the effect of WebTrust seal on online purchasing decisions. Researchers in many studies appeared in table 1 assert the importance of displaying web assurance seals in sites working in E Commerce area. The purpose of these seals is to reduce fears and concerns regarding information security and business legitimacy. Also, obtaining web assurance seal could have a positive influence in companies' performance. As expected, consumers incorrectly understand that assurance seal is sign of quality. That is the site that display assurance seal achieve high quality level. Also, consumers overestimating degree of protection against fraud that assurance seal could provide. Thus, the implication of web assurance is not understood by many consumers. So, assurance seals could serve as promotion tool to sites selling low quality products and services. There are mixed results regarding the effects of web assurance service and consumer perception of web sites. Some studies suggest that assurance seal is not providing additional assurance to consumer. So, Consumer is looking only for the seller's disclosure and not paying attention to the third party assurance. Other studies conclude that intent to online purchase is associated with perception of assurance seal and clicking on it. This mixture is reflected more in expectation gap referred by some researchers. That gap is between what consumers need and what they think that it is

10 provided by web assurance providers. Of course, that gap resembles well-known gap in auditing. That will bring a lot of fears to accountants because of litigation possibilities. Finally, accounting profession failed to lead web assurance market. That failure is not consistent with tremendous investments made by the profession. In his regard, it should be noted that there is another mixed results in web assurance research. Some results suggest that other organizations working in web assurance field provide a higher quality services. Other studies report that WebTrust is the most comprehensive service and the problem is how to market it. Perhaps future research leads us to decisive conclusion. 5. SUMMARY AND CONOLUSION 5.1 Summary Transactions volume performed through Internet is not attaining expectations. Customers feel worry and fear to expose to fraud and misuse their private information. To overcome this problem, some organizations established to provide trust in E commerce transactions through what is known as Web Assurance service. These organizations provide services resemble what is known in accounting arena as Assurance Services which provided by auditing firms. American institute of Certified Accountants (AICPA) and Canadian Institute of Charted Accountants (CICA) adopted and implemented a joint project to create a new assurance service in order to provide trust in E commerce transactions. That service known as WebTrust. Thus, accountants entered a new environment of hard competition to increase their revenues and compensate slow growth of their traditional services like financial statements audits. Unfortunately, WebTrust is not growing as expected. Competitors prevailed and their brands became more popular in E commerce filed. So, many accounting studies are devoted to evaluate WebTrust and explore possibilities of improvements. This study aimed to illustrate the need of trust and nature of web assurance seals and to discuss Web assurance research. 5.2 Conclusion A web assurance service is still in its beginning stage. We are at the first decade. Previous studies reported mixed results. This could suggest that assurance seal is not credible as it should be. Also, number of sites displayed assurance seal as revealed by prior research is relatively low [ 2709 site only covered by BBBonline, TRUSTe, and WebTrust together]. It seems that a large number of companies did not accept assurance provided by a third party. Commercially, WebTrust is not a successful project yet. It does not mean that future is not promising. WebTrust may needs some modifications to bridge the gap between what provided in assurance service and what consumers are looking for. Specially, this may be a vital issue to accounting profession because of expertise of assurance service that accountants have. Accounting profession has the ability to differentiate itself in web assurance market. WebTrust assurance could be going beyond certifying practices of privacy and security. This could be done by providing reasonable assurance regarding sites and systems design, products and services, and fraud likelihood.

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