“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) EDI has revolutionized how companies do
business with one another. Prior to EDI, ordering inventory would take several days using
physical documents and purchase orders being mailed between businesses. Now it takes
hours to complete the entire ordering process, which saves time and cost for companies.
Some of the cost savings include, paper, postage, and offsite storage costs. Image
processing systems work hand in hand with EDI to transfer information between
businesses electronically. “Image processing is a method to perform some operations on
an image, in order to get an enhanced image or to extract some useful information from it.
It is a type of signal processing in which input is an image and output may be image or
characteristics/features associated with that image.” (University of Tartu, n.d.)
c c c EDI and Image Processing Systems not only give an advantage to businesses but
they can also assist in auditing a company. If the company being audited adds an
integrated test facility (ITF) built into their systems auditor can test processes without
affecting actual data. “An integrated test facility (ITF) is a fictitious entity, such as an
imaginary company, established on a live data file. It enables the auditor to enter test
transactions into the system without corrupting the integrity of real operational or financial
data.” (AICPA, 1996) This allows for a wide-range of testing, because this test data
follows the same process as an actual transaction. It also gives repeating auditors minimal
difficulty when testing controls. Most if not all EDI systems come with ITF.
Although EDI and Image Processing Systems have brought significant benefits to
businesses and auditors, they can also have an inverse effect. If information is not
transferred correctly the business could end up purchasing too much or too little of
inventory which would affect the business significantly. Also if ITF is not available for an
auditor it will be more difficult to audit these controls. Auditors would need to do
extensive research on how the controls work properly and would require more sampling.
In my opinion, the pros outweigh the cons. EDI and Image Processing Systems
have done wonders for the processing of invoices and sending communication business to
business. My current employer has gone paperless and in the implementation phases we
tested using ITF. We wanted to ensure that auditors would be able to see the controls with
ease. We have also been keeping 7 years’ worth of documentation offsite and shredding
documents prior. Our costs for offsite storage have decreased and will be eliminated as of
2025. I have done several walkthroughs with E&Y and have had no issues with these
controls since implementation.
References
Messier, W. Glover, S. Prawitt, D. (2019). Auditing & Assurance Services: A Systematic
Approach 11th Edition. McGraw Hill Education.
What is EDI (Electronic Data Interchange)? (2021, May 7). EDI Basics. Retrieved
September 14, 2022, from https://www.edibasics.com/what-is-edi/
University of Tartu, U. (n.d.). Digital Imaging Processing. University of Tartu. Retrieved
September 14, 2022, from https://sisu.ut.ee/imageprocessing/book/1
American Institute of Certified Public Accountants and Canadian Institute of Chartered
Accountants, "Audit implications of EDI; Auditing procedure study;" (1996).
Guides, Handbooks and Manuals. 36.
