Evaluating IT Benefits and Risks and
Identifying Assurance Services Opportunities
Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt
After completing and discussing this case, you should be able to
• Identify benefits to businesses from implementing information
technologies " Recognize risks that are associated with the use of information technology
• Determine how CPAs can provide assurance about processes designed to reduce risks created when new IT systems are introduced
• Understand ways CPAs can identify new assurance services opportunities, including the AICPA's SysTrust® service
• Prepare a formal business memorandum
INTRODUCTION - PART A
The Jacksonville Jaguars National Football League (NFL) team is taking advantage of information technology (IT) tools in the sale of stadium snacks and souvenirs. At Alltel Stadium where the Jaguars play their home games, football fans can use Spot Cards to purchase soft drinks, beer, popcorn, and Jaguar souvenirs rather than fumble for cash and change when making their purchases.1 These reloadable Spot Cards,
'Many of the facts about the Spot Card system are based on an article titled, "Jacksonville Jaguars Fans Score Big with Smart Cards," by Maura McEnaney which appeared in EC World, January 1998, pp. 24 -27.
The case was prepared by Mark S. Beasley, Ph.D. and Frank A. Buckless, Ph.D. of North Carolina State University and Steven M. Glover, Ph.D. and Douglas F. Prawitt, Ph.D. of Brigham Young University, as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of an administrative situation.
Copyright © 2003 by Pearson Education, Inc., Upper Saddle River, NJ 07458.
Beasley / Buckless / Glover / Prawitt
which contain an embedded computer chip, operate in a manner similar to other smart cards such as Kinko's ExpressPay cards and many university student identification cards used for fee payment, meal and book purchases, and building access.
Not only does the Spot Card offer benefits to fans in the stadium, but the use of IT offers advantages for snack and souvenir vendors by providing better information for monitoring their businesses. Although IT offers improvements for the fans and vendors, those who rely on the Spot Card to process sales need assurance that the technology and related information produced is accurate and reliable.
CPAs are in a position to leverage their independence and their information accumulation and evaluation skills, among other abilities, to provide assurance to those relying on IT. The use of the Spot Card at Alltel Stadium offers opportunities for CPAs to provide valuable assurance particularly to stadium management and vendors who must rely on this IT to do business.
BACKGROUND ABOUT THE JAGUAR'S SPOT CARD
The implementation of the Spot Card at the stadium in Jacksonville in the fall of 1995 represents one the first uses of that type of IT in a major sports stadium. The stadium contracted with First Union Bank, based in Charlotte, North Carolina, to develop and implement the Spot Card system. First Union contracted withDiebold Incorporated of Canton, Ohio, which manufactures card-based transaction systems, to develop the Spot Card system.
Customers purchase Spot Cards in various denominations such as $20, $50, and $100. ATM-like machines in the stadium allow fans to transfer funds from their bank or credit card onto an electronic chip on the Spot Card. Fans can also buy cards with cash or with a debit card. Other terminals are also located in various First Union branches around Jacksonville. Card readers located throughout the stadium allow fans to check the balances remaining on their cards.
Fans purchasing snacks and souvenirs present their Spot Card to vendors at concession and souvenir stands, who calculate sales amounts and swipe the cards through point-of-sale (POS) machines. Software tracks each transaction for vendors. Before the transaction is complete, fans review the amount to be deducted and punch the "Yes" key on the POS machine. At that point, the POS device deducts the purchase amount from the chip-embedded balance on the fan's Spot Card. These cards can also be used at battery-operated POS computers carried by vendors who roam the stadium stands selling merchandise during the game.
The POS machines capture information about each transaction. The system records the card number, location code, and the date and time of the transaction as well as the items sold. That information is later summarized for vendors.
Once the game is over, vendors link their POS machines to a network that allows the transfer of data stored on each POS machine to a computer located in the stadium counting room. Once all the data are downloaded to that computer, the information is then transmitted to a host computer at First Union Bank in Jacksonville. The host computer uses the data transmitted to settle that day's sales with each vendor in the stadium. The host computer produces various reports, which provide vendors detailed information to track sales volume for specific products in specific sections of the stadium.
First Union Bank receives a fee from every Spot Card transaction, and the bank collects whatever remains on an unused Spot Card at the end of two years. First
Case 1 - Jacksonville Jaguars
Union also sells player-signature Spot Cards with pictures of selected Jaguar players on the front for an additional fee.
Other stadiums around the country, such as the Carolina Panthers' stadium in North Carolina, have started to use similar technologies. As fans grow more accustomed to the use of transaction cards like the Spot Card, there will undoubtedly be expanded opportunities for using the cards to pay for stadium parking or merchandise and promotions outside the stadium.
OPPORTUNITIES FOR CPAS TO PROVIDE ASSURANCE
The American Institute of Certified Public Accountants (AICPA) continues to develop new CPA "assurance services" opportunities. These services are designed to allow CPAs to provide assurance about the reliability and relevance of information decision-makers use to run their businesses.
Certain forms of assurance services have always been performed by CPAs. For example, auditors of historical financial statements provide assurance about whether those financial statements are in conformity with generally accepted accounting principles. Continuous changes in IT will provide new opportunities for CPAs to provide assurance regarding the accuracy, reliability and relevance of information produced by these technologies. Organizations will have greater need for assurance on systems and controls as IT continues to play a larger role in business.
One of these newly developed services, AICPA SysTrust®, relates to assurance regarding IT systems reliability. In these engagements, CPAs can provide users with assurance that an IT system has been properly designed and produces reliable data. In doing so, CPAs might test the integrity of an information system by analyzing sample IT output for accuracy. Assurance providers can also provide valuable services to help organizations determine whether systems are secure and whether adequate contingency plans are in place in the event of system failure or disaster.
As First Union and its competitors attempt to market Spot Cardtechnologies to other stadiums and businesses, there may be opportunities for CPAs to provide assurance that the processes related to this technology produce accurate and reliable information. Providers, such as First Union, can then use the assurance to better market their products.
1. To become more familiar with emerging assurance services opportunities, review the Assurance Services site at the AICPA's Web page (www.aicpa.org). The Assurance Services Site link on the opening page of this web site provides a great overview of the information contained in this site. Search this web site about assurance services to complete the following exercises: a. Summarize in your own words the definition of assurance services b. Describe the 10 major themes the Special Committee on Assurances Services
used to develop the new assurance service opportunities c. Drill down under the link "About Assurance Services" to locate the link for the
"Future of the Financial Statement Audit." Read the Executive Summary and
describe the "old paradigm" and "new paradigm" for providing assurance d. Describe briefly these assurance services: WebTrust, SysTrust, ElderCare, and
CPA Performance View e. Explore the information about the SysTrust service and describe the
Beasley / Buckless / Glover / Prawitt
• Basic objective of this service
• Four Principles that CPAs use to assess system reliability
• Parties likely to benefit from this service
• Reasons why CPAs have a competitive edge for conducting SysTrust engagements
2. The use of IT offers tremendous advantages. What benefits does the use of Spot Cards offer to following groups:
• Jaguar stadium snack and souvenir vendors?
• Fans in the stadium?
• First Union Bank?
3. While the Spot Card offers several benefits, the use of the related information technology to process snack and souvenir transactions does create new risks. Identify risks for the following groups:
• Snack and souvenir vendors
• Fans in the stadium
• First Union Bank
4. What processes or controls could the stadium and First Union implement to help reduce these risks?
5. How might CPAs be able to structure an assurance services engagement to assure stadium vendors that information processed through the Spot Card system is reliable? What kind of information could the CPA examine and evaluate in order to assure stadium vendors that they can reasonably rely on the Spot Card system to conduct business?
Case 1 - Jacksonville Jaguars
INTRODUCTION - PART В
After completing Part A of this assignment, your instructor may ask you to complete Part B. Do not proceed to Part В unless requested to do so by your instructor.
Congratulations!!! You were recently promoted to audit manager. Your strong work ethic and, of course, your excellent college training have propelled your career to new heights.
One of the challenges of your new role is that you are now held accountable (i.e., raises, bonuses, the partnership!) for bringing in new business. You have been regularly reading the financial business press (i.e., newspapers, business magazines) to see if you can identify new service opportunities.
The managing partner came to you today and asked if you know of any companies that recently introduced new IT that could lead to consulting or assurance services opportunities. He is particularly interested in identifying opportunities to provide some form of assurance about risks related to newly implemented IT. After you indicated you are actually working on a couple of ideas, he was excited to hear more. He asked you to prepare a memorandum outlining your answers to address the following issues:
REQUIRED - PART В
1. Please describe a situation where a company recently introduced a new IT into their business operations. You should look for a real world example from the business press. Look for a business that recently increased its reliance on IT. The Spot Card technology used at the Jacksonville Jaguars stadium is a good example. Please attach a copy of the article you use to prepare your memorandum.
2. ' Please describe the new technology and how it is used. Provide enough information for the partner to understand the technology without having to go back to the attached article.
3. Explain why the company introduced the technology. Highlight the benefits to various constituents affected by the technology. The benefits related to the technology are probably easily identified and may even be discussed in the related article. However, the article does not likely address risks that are introduced. Please provide a thorough discussion of the risks to all parties affected by the new technology.
4. Given the risks identified, describe whether there are any related assurance services and discuss who would likely buy these services. Describe information risks about which your firm intends to provide assurance. Your memo will serve as the basis for the formal business proposal that will be sent to the potential client. Please be sure to briefly outline in your memo what assurance services are because the potential client may not have heard the terms. Make sure you explain the term "assurance services" in your own words so that the potential client has a better idea of exactly what services you propose to provide.
Beasley / Buckless / Glover / Prawitt
5. In describing the nature of the assurance services that you plan to provide, please highlight the types of evidence you would want to gather as a basis for providing the assurance. For example, you might consider evaluating the contingency plan describing how the company would deal with breakdowns in technology hardware or software or the communication infrastructure. In this example, you would want to specifically describe what types of information you would look for in that plan.
Your partner is very busy and doesn't want your memo to be too long. So, strive to be clear and concise and be sure to attach the related article(s) to your memo. Try to step out of the typical accountant's box and be creative!!! You'll be expected to do so in the real world.