Financial reporting on the Internet and the external audit

Electronic dissemination of financial reports on the World Wide Web is becoming ubiquitous for larger corporations in developed market economies. This form of reporting presents many challenges for the financial statement audit. It is critical that the audit profession proactively addresses those challenges or they will be certainly addressed by government regulatory bodies and the courts of law. Most large listed public companies in France, Germany and the UK provide electronic versions of their printed annual reports on the web. A survey was made of fortyfive large listed UK, French and German corporations. A total of thirty-six of these corporations published their annual financial statements in HTML or Adobe Corporation's Acrobat. Ten of the seventeen corporations reporting in HTML included the auditors' report on their website. None of these reports linked back to the auditors' own site. A number of issues arise when corporations provide their financial statement audits on the web. These issues include the ease with which the auditor's report can be changed without any indication that a change was made; the meaning of the look and feel of the auditor's report in a rapidly changing web environment; and the implications of hyperlinks to and from web-based auditors' reports as well as the location and placement of the auditors' reports.