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. Having an
understanding of 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.
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/
