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.
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.
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). b 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.
