Evoluoting eBusiness Revenue Recognition,
lnformstion Privocy, ond Eledronic Evidence lssues
'-:; s. Brasr,nv'FnaNrA.
Bucruess . srsvsx M. Gr,ovnn.Doucr,as
[.EARNING OBJECTIVES .*-::: :ompleting and discussing this case
you should be able to  Recognize issues surrounding the privacy of customer information  Describe audit implications when transaction evidence is solely electronic  Recognize threats to eBusiness strategies, which rely solely on the delivery of services "via the Internet
.J:ntify business risks for Internet-only business :rldels
Le;ommend internal control improvements for "r eBusiness-based company Understand selected eBusiness related revenue :ecognition issues
:et-only companies exchange banner ad services
accounting issues that arise when Inter_
-]i:er being in business for only two years, yourl040Return.com has_quickly become a leading ::'-rr-ider of online income tax preparation and-filing services for mdividuaf taxpayers. steven -..cago founded the company business idea cine to him f", individual tax ^ft"i ^ ::eDaration software. As he stared at all the software,packages -hiil;h;;pt"g on the rh"frr", a"t a local computer ,:pply store, the following thought kept racing thro,rgh his riind,
"yith all of the tax law changes from year to year, why should I shell out $50 Jor a CD that will be obsolete next yeir, not to mentiin the $iO I haue to pay to-fite my taxes electronic,ally over the Internet? I'd rather pqt company a small irrirarrin,p ..a fee to use c o ntinu ally up d at e d t a x p r ep ar ati o n s oJtw;r;.,, l'-ot long after his shopping experience, chicago, an entrepreneur at heart, decided to create such a :ornpany' Less than one year later, Your1040Return..o-'b"grn operations in time for the next tax s aas on.
OVERVIEW OF YO URT O4ORETURN.C OM OPERATIONS
\ our1O40Retum'com is an entirely Internet-based tax preparation website for preparing and filing federal .nd state individual income tax returns. Most of its revenues come from indlviduals seeking to :'n-oid preparation of a paper-based tax return and who are willing to "rentli ;.;;;, to a popular tax ::eparation software P,...klg" through YourlO40Return.com. othJr revenues come from individuals -"'-anting to electronically file an alrJady prepared paper-based return. ----'casewasPreparedbyMarkS'Beasley,Ph'D andFrankA.Buckless,Ph.D.ofNorthCarolinastateuniversityandStevenM.Glover,ph.D.and names represented are fictitious; any similarity to existing companies or persons is purelr. coincidental.
J::glasF Prawitt'Ph'D ofBrighamYounguniversity,asabasisforclassdiscussion.rburrO-roReturn.comisafictitiouscompany. ::-j
(opyright @ 2012 by Peorson [ducolion, lnc., Upper Soddle River, NJ 0245g
Seclion 2: Underslonding the
Business ond Assessing Risk
For a minimal fee, Yourl040Return.com pror-ides an interface for individuals to electronically file their returns with the appropriate federal and state regulatory bodies. Typical users come from middle class households wanting to simpiify yearly tax return preparation tasks. These users are generally searching for an accurate, easy, and economical alternative to other professional tax services. Individuals can access these services through Yourl04OReturn.com's website. To log on, customers must first register for a user name and password. Once the customer indicates that he or she wants to register, the website asks the customer to provide information including full name, mailing address, Social Security number, birth date, phone number, email address, and a major credit card number. This registers the individual on YourlO4OReturn.com's website and initiates the credit card approval process. Once the credit card number is validated, customers select from one of three service packages: Silver, Gold, or Platinum. The Silver...