Electronic Data Interchange (EDI) the exchange of information that occur between one company
and another, based on purchases, sales, payment, and collection transactions, among others. Both
companies do their business transactions in an agreed standard format, and it goes from the
client's computer to the vendor's computer, and vice versa. This type of transaction is
characterized by the absence of physical documents (paper formats), everything is digital, which
means that company "A" (client) will send to company "B" (vendor) a purchase order with what it
expects to buy, likewise company "B" will send company "A" the sales order and the invoice of
what it will send. In the same way, the collection-payment relationship between both parties will
be executed. One of the advantages of this type of transaction is the saving of time in the business
cycle, in addition to minimizing the human error that these transactions entail when they are
manual on paper.
The Image Processing System becomes a positive practice for companies, and although not all of
them adopt it for some reason such as lack of equipment or programs. This practice offers the
possibility of keeping the record of all the documentation of commercial transactions for much
longer, in addition to simplifying their storage. Likewise, this practice becomes a key tool to
document the traceability of the complete operation (cash conversion cycle) by simply scanning to
convert the physical documentation into a digital image (a purchase order, a sales order, an
invoice, the documentation receipt of material, or a paid check among many other documents).
It is necessary for the auditor, to know how the company that is auditing handles the EDI
transactions with the clients and/or vendors, and what type of access from each one of them has
to the information of the company. Suppose the company manufactures "X" product and one of
its raw and packaging material's vendors has access to the production forecast, if for some reason
the company executes a change in the production schedule without updating the information
accessed by the vendor, it could send quantities of raw or packaging material than you plan to
manufacture.
All these digital transactions have many advantages as long as the information is kept up to date,
however the auditor must perform the audit tests to obtain evidence: 1) Risk assessment
procedures, to obtain an understanding of the entity and its environment, including its internal
control, to assess the risks of material misstatement in the financial statements and at the
relevant assertion levels; 2) Tests of controls to test the operating effectiveness of controls in
preventing, or detecting and correcting, material misstatements at the relevant assertion level;
and 3) Substantive procedures to detect material misstatement at the relevant assertion level.
Substantive procedures include tests of details and substantive analytical procedures (Messier,
Glover and Prawitt, 2019).
Some advantages of paper evidence are that it is more difficult to alter it without being noticed,
while the electronic format if it is altered, is not detected except by evaluating the integrity of the
security controls and techniques. Likewise, we look at the approval levels in paper evidence on the
paper itself, while in electronic evidence we can evaluate the authorization levels using security
controls and techniques that allow us to determine who, how and when the information was
authorized. Electronic Data Interchange (EDI) is the electronic transmission of information such as
invoices, billing, electronic payments, proof of delivery, product order, and a variety of another
task. It plays a major part in the modern worldwide e-commerce market that we find ourselves in.
The Global Electronic Data Interchange Market accounted for over $4 million last year and is
projected to continue to grow by millions in the next several years. However, some of the main
factors hindering implementation of EDI would be cost, security, lack of third-party network
support, and lack of control and transaction auditing. By a company utilizing EDI, it could create a
lack of an audit trail; such as signatures for authorizing transactions, data integrity, fear of losing
data, and lack hard copies of documents. One solution to some of these concerns would be Image
processing systems.
Image processing systems are how paper documents are converted to digital files. This allows
documents to be stored so that the image can be quickly and easily retrieved.
At my current job we used computer program to create invoices and utilize Image processing
(scanners) to connect records of delivery as well as authorization of payments. By utilizing both
tools it creates a quick and efficient way of doing business and allows proper documentation for
internal controls and audits.
"Electronic Data Interchange Market Research Report - Global Forecast to 2026 - Cumulative
Impact of COVID-19." Plus Company Updates 25 Nov. 2021: NA. Business Insights: Global. Web. 13
Sept. 2022. https://www.reportlinker.com/p06169005/?utm_source=GNW
Angeles, R. & Corritore, C.L. & Basu,S.C. & Nath, R. (2001), Success factors for domestic and
international electronic data interchange (EDI) implementation for US firms. International Journal
of Information Management, Volume 21, Issue 5, October 2001.
