The EDI can also be referred to as, electronic data interchange, which is where businesses can
exchange and share information in a standardized fashion. This breakthrough method of digitally
transforming data, eliminates paper waste exponentially. Commonly, this is a way for business
associates to share items such as purchase orders, invoicing, intracompany bills, and bills of lading.
Documents are also able to be scanned and converted into a document such as a PDF allowing for
easy storage and locating in the future.
Some sources of information that are used by auditors in to reach conclusions include audit
evidence and documentation. Understanding the nature of the evidence is extremely important
both for auditors and other finance professionals. This is mandatory to give the auditor the ability
to determine a company's sufficiency, appropriateness, relevancy, and reliability.
Having a business that utilizes computer-based systems is something that has become
substantially more popular. The result of this is a need for auditors to become more comfortable
with gathering digital documents. To help with this process, the AICPA released "Statement on
Auditing Standards No. 80" an Amendment to SAS No. 31 which provides better guidance for
auditing professionals. ".. in entities where a significant amount of information is "transmitted,
processed, maintained or accessed electronically, it may be impractical or impossible to reduce
detection risk to an acceptable level by performing only substantive procedures. In such
circumstances, tests of controls normally would be performed to obtain evidence that would
enable the auditor to achieve an assessed level of control risk sufficiently below the maximum.
That evidence, when combined with evidence obtained by performing substantive tests, may
constitute sufficient evidential matter to enable the auditor to express an opinion. (SAS no. 80,
1997)"
When an auditor is unable to gather the sufficient evidence that is needed, the auditor reserves
the right to make a choice between qualifying and disclaiming an opinion, due to scope
limitations. When relying on the presence of electronic evidence, the auditors have the right to
conclude that performing substantive tests will not reduce detection risk. It is important to use
control measures for further testing including a test of controls, to support assessed level of risk
below the maximum for affected assertions.
As electronic data interchange, image processing, and technology in general become more
prevalent today, it is increasingly important to consider the effects of these technologies and, at
the very least, have a working knowledge of them. “With EDI, an entity and its customers or
suppliers use communication links to transact business electronically. Purchase, shipping, billing,
cash receipt and cash disbursement transactions often are consummated entirely by exchanging
electronic messages” (WILLIAMSON, 2022). As an audit associate, I can say 99% of the support,
work papers, messages, and communication I engage with is electronic. Without the use of EDI,
the audit process would probably be far more time consuming as there would be huge lags in
getting support, communicating, and ultimately completing an audit. “In image processing
systems, documents are scanned and converted into electronic images to facilitate storage, and
reference and source documents may not be retained after conversion” (WILLIAMSON, 2022).
However, this increasing prevalence in electronic source documents does present some risks.
According to our textbook, “Audit evidence provided by original documents is more reliable than
audit evidence provided by photocopies or facsimiles. An auditor’s examination of an original,
signed copy of a lease agreement is more reliable than photocopy” (McGraw, 2022). With simple
software programs such as photoshop, people are capable of editing or even completing changing
electronic documents while still making them look exactly like the original. Signatures can be
forged far easier with technology than when people used to put pen to paper. This is something
that all auditors need to be aware of and keep in mind as part of their due care.
References
Journal for Accountancy. (1997, January 1). SAS No. 80. Journal of Accountancy. Retrieved
September 12, 2022 from https://www.journalofaccountancy.com/issues/1997/jan/sas80.html
Messier, W.F.,Glover, S.M., & Prawitt, D. F. (2023) Chapter 5: Evidence and Documentation. In
Auditing and Assurance Services: A systematic approach. essay, McGraw Hill Education.
What is EDI (Electronic Data Interchange) EDI Basics. (2021, May 7). Retrieved September 12, 2022
from https://www.edibasics.com/what-is-edi/
WILLIAMSON, A. (2022). The Implications of Electronic Evidence. Journal of Accountancy. Retrieved
16 September 2022, from
https://www.journalofaccountancy.com/issues/1997/feb/implic.html#:~:text=
Messier, W., Glover, S., & Prawitt, D. (2018, October 19). Auditing & Assurance Services: A
systematic approach. McGraw Hill. Retrieved August 31, 2022, from
https://www.mheducation.com/highered/product/auditing-assurance-services-systematic-
approach-messier-jr-glover/M9781259969447.html
