Electronic data interchange and image-processing systems are a
reality in the accounting and auditing world now and have basically
replaced the paper record keeping, filing systems, mail, and email that
many are familiar with. "By moving from a paper-based exchange of
business document to one that is electronic, businesses enjoy major
benefits such as reduced cost, increased processing speed, reduced
errors and improved relationships with business partners." (EDI, n.d.)
Even though email is considered electronic, it is still a manual process
that people have to handle unlike electronic data interchange. This
electronic processing system reduces the risk of errors and material
misstatements. EDI cuts out the people and takes the data from one
internal system straight to the other internal system. The types of
documents that may be transferred from one internal system to
another include invoices, customs documents, purchase orders,
payment documents, and inventory documents.
While there are many benefits of technology and electronic data
interchange, there are some negative implications as well when it
comes to auditing. EDI leads to changes needing to be made in the
audit process and potential security breach issues. "The auditor needs
to understand how the entity conducts business using EDI and to
adjust audit procedures accordingly. EDI creates a dependence on the
trading partner's computer system, so its errors and security breaches
might affect the client's system." (The Electronic Auditor, 1998)
Errors made electronically should be taken into account when
performing an audit of a company that utilizes EDI such as
overstatements or understatements of revenue, accounts receivable,
or inventory components. Due to image-processing systems
diminishing physical paper trails, the auditor needs to ensure that the
electronic documentation is authentic. "The auditor should test
controls that provide assurance that only valid and authorized
documents (such as insurance claims that result in cash
disbursements) are scanned into the system. For example, the auditor
could review an image of a purchase order when someone had used a
desktop publishing program to alter the quantities, prices and other
relevant data, creating an image that could be substantially different
from the now-discarded original paper document." (The Electronic
Auditor, 1998) The auditor should ensure that proper controls are in
place to make sure that documents are authentic and accurate.
References
EDI. (n.d.). What is EDI (Electronic Data Interchange)? EDIbasics.com.
Retrieved September 15, 2022, from
https://www.edibasics.com/what-is-edi/
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.
The Electronic Auditor. (1998, March 31). Journal of Accountancy.
https://www.journalofaccountancy.com/issues/1998/apr/helms.htm
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