a EDI is a component of electronic commerce. It demands that two or more partners in a trade
approving to accept a specific standard data format for conducting conventional business
transactions. A main feature is EDI’s autonomy from a paper; conventional source records in a
vendor-client association. Messier, W. F., Glover, S. M., & Prawitt, D. F. (2019). This could be
like the invoices and purchase orders, which do not appear in the form of paper. Another
particularity is the compressed business cycle, leading to lower year end balances for
receivables inventory, and payables. Frequently, accounting transactions and data are
transferred between partners of trade by a value-added network.
a a a a The auditor should know how the entity handles business utilizing EDI and to modify
audit rules accordingly. EDI creates a dependency on the structure of a trading partners
computer, so its glitches and safety breaches might influence the client’s system. Radley. (n.d.)
The client manufactures raw materials to the partner based on an electronic demand of the
partners inventory system. This system may contain flaws and calculate an inaccurate ideal
order amount, resulting in conflict if the client ships too many or too few raw materials. The
auditor must be concerned that revenue and accounts receivables could be expanded if too
many of the products were shipped or result in liability in a case of too few shipped goods.
There are controls such as firewalls, encryption, etc. that relate to communication technologies.
Radley. (n.d.) The auditor may need to review the agreements on trading partner. The revenue
concepts might be altered because of the new business exercises.
a a a a The imaging processing system has technology that entails transforming paper records
into electronic form. This is done by scanning and then retrieving the electronic copy. The most
important issue in image processing records is the “authenticity”. The electronic copy is exactly
what it implies. The auditor always needs to examine the controls that make sure everything is
valid and documents are approved and scanned. Once the scanned image is captured the
quality control function is required to make sure there are no errors. Messier, W. F., Glover, S.
M., & Prawitt, D. F. (2019). The auditor will make sure there are passwords used to restrict
unauthorized modifications.
Sources:
What is edi. Radley. (n.d.). Retrieved September 15, 2022, from
https://www.radley.com/edi-solutions/what-is-edi/
Messier, W. F., Glover, S. M., & Prawitt, D. F. (2019). Auditing & Assurance Services: A
systematic approach. McGraw-Hill Education.
