The electronic data interchange (EDI) is “the computer-to-computer exchange of business
documents in a standard electronic format between business partners,” (“What Is EDI (Electronic
Data Interchange)?.” 2021). This means information communicated from computer to computer
and replaces email, fax, and postal mail. An integration of EDI into the functions of a business’s
operations that allows the company and partners to share a wide range of documents from
business to business efficiently and in a timely manner. Companies has the capabilities to share
information such as invoices, purchase orders, or quotations. The image-processing system is used
to find various patterns and characteristics in images. Analogue and digital image processing are
the two types of methods utilized for image processing. Compression, encoding, image
enhancement, and restoration are the four common types of image processing.
There are many factors an auditor must take into consideration when determining the timing and
nature of the required auditing procedure of a company’s financial statement. The nature of the
evidence is one consideration the auditor should consider and it is referred to the form or type of
information used in the audit process. The auditing records of the business includes operational
records of initial entries, journal entries, records of electronic funds transfers, invoices, contracts,
and computations, reconciliations, and disclosures. The sufficiency and appropriateness of audit
evidence is another consideration, this step “measures the quality of audit evidence, sufficiency,
and appropriateness of audit evidence are interrelated,” (Messier Jr. et.al., 2017). The risk of
material misstatement and by the quality of the audit evidence gathered can impact the quantity
of audit evidence. This means, an auditor must make an evaluation of the evidence gathered by
analysing and understanding the types of evidence available. This evaluation will allow the auditor
to formulate an unbiased and thorough auditing process, which determines fairness of
management’s statements.
The electronic data interchange eliminates paper and related audit trials, which allows
transactions to be processed without any human intervention. An auditor’s main concern when
evaluating the EDI controls is to ensure that the EDI transactions are authorize, validated, and in
compliance with the policy of the organization and no unauthorized organizations gain access to
records and approved data can only be accessed by authorized trading partners. EDI affect audits
because it presents audit and control implications. The auditor must gain an understanding of how
the entity conducts business when using EDI and adjust audit procedures accordingly. EDI and
image processing changes the nature of technology, which creates a dependency on trading
partners computer system, so errors and security breaches might affect the client’s system.
Electronic Data Interchange (EDI) is a format used to exchange business information from
computer to computer rather than using paper documentation and having to hand deliver it. This
allows information to be shared at a faster pace which in return allows work to get done quicker.
Not only is EDI faster for communication purposes but it also saves companies money, data
transfer reduces errors, and the integration improves traceability and reporting (IBM).
Image-processing systems scan and convert documents into electronic images to create storage.
By having this electronic evidence, the auditor can use the electronic information as competent
evidence. It allows easy access to documents that may be needed by an audit (Williamson, 1997).
For the two different forms explained above, auditors would consider the evidence that is created
from either of the two to be relevant and reliable (Messier, 2017). The documentation on both
would be the same as written documents for the audit to use as evidence, however it is just
transformed into an electronic form. This makes the documentation more reliable because if the
auditor is somewhere that has a computer, they will be able to pull up any of the evidence they
may need.
References:
IBM. (n.d.). What is EDI: Electronic Data Interchange? | IBM. Www.ibm.com.
https://www.ibm.com/topics/edi-electronic-data-interchange
Messier, W. F., Jr., Glover, S. M., & Prawitt, D. F. (2017). Auditing & assurance services: A
systematic approach (10th ed.). New York, NY: McGraw-Hill Education.
Williamson, Louise. (February 1, 1997). The Implications of Electronic Evidence. The Implications of
Electronic Evidence (journalofaccountancy.com)
GeeksforGeeks. (2019, December 4). Components of Image Processing System. Retrieved
September 13, 2022, from https://www.geeksforgeeks.org/components-of-image-processing-
system/#:%7E:text=Image%20Processing%20System%20is%20the,processing%20on%20the%20digit
al%20images.
Messier Jr., W. F., Glover, S. M., & Prawitt, D. F. (2017). Auditing & assurance services: A
systematic approach. No Title (10th ed.). New York, NY: McGraw-Hill Education.
Splettstoesser, I. B. (1997). Managing and Auditing: Electronic Data Interchange. The CPA Journal,
67(11), 26. Retrieved from https://search-ebscohost-
com.ezproxy.snhu.edu/login.aspx?direct=true&db=edsbig&AN=edsbig.A57590711&site=eds-
live&scope=site.
What is EDI (Electronic Data Interchange)? (2021, May 7). Retrieved September 13, 2022, from
https://www.edibasics.com/what-is-edi/
