There once was a time where spreadsheets were sheets of actual paper spread across a wide
table. Columns and rows marked across the sheets with people sprawled across them jotting
down numbers in cells. If a change needed to be made on one cell, erasers flew across the page,
striking old numbers and recalculating new ones. What a pain that must have been.
I thought this week’s reading and the discussion prompt were well suited together. The discussion
of what constituted evidence and documentation is well understood from the framework of
shifting paradigms of operations. In this shifting digital environment with deepfake technology,
anonymous online transactions, and blockchain technology, what is real and what can be
documented is an intriguing question.
We are asked to define two technologies that have been available to the practice of audits for
quite some time. EDI or Electronic Data Interchange can be seen as the standard digitization of
information that was typically collected and transferred by paper. Taking paper transactions of
documents, forms, purchase orders and invoices and automating their collection storage and
transmission between customers and producers or within the links of a supply chain.
Image processing systems originated from scanner-type equipment that took a digital image of
documents and facilitated the electronic storage of these images, reference them for ease of
access, and organize their placement within a database. Today, image processing systems can do
so much more, from image recognition, conversion of handwritten notes to computerized text,
and machine learning techniques to enhance, clarify, or replace difficult to read text, among many
other operations possible.
Research into the academic literature around these tools highlights that the implications of these
systems in audit evidence and documentation have been around since the dawn of personal
computers, and many of the concerns of that time are still worthy of consideration today. In a
1989 article in MIS Quarterly, the growing use of EDI in businesses raised concerns over among
other things, “There is virtually no paper for the auditor to examine in this system. The only paper
is the contract between the manufacturer and its suppliers. The manufacturer has established a
policy of purchasing goods only through suppliers who agree to participate in the electronic data
interchange network.” Adding “Such developments immediately raise questions concerning
control” (Hansen, 1989)
In a 1997 article in The CPA Journal, the author was more direct in which elements EDI raised
concern. Stating, “financial statement assertions most affected by EDI are completeness, accuracy,
and authorization. For example, questions asked with respect to controls could include: How do
we know that all goods shipped are billed (completeness)? Was the customer billed the correct
amount (accuracy), and were all price exceptions approved (authorization)?” (Splettstoesser, 1997)
Image processing has created many of the same challenges as well. In a 1997 article in The Journal
of Accountancy, the author highlighted that with image uploads, there were limited controls over
the retention of original documents and the long-term storage of files after uploaded. (Williamson,
1997)
For good reason this discussion has evolved as technology evolves, but the standards of the
practice of auditing have adjusted as well. Statement on Auditing Standards No. 80 was amended
to reflect the emergence of electronic transactions as they relate to assertions and evidential
matters, specifically the addition of section 18 that directly addresses EDI and image processing.
The world changes and new technologies will come into direct conflict with the standards and
processes we once thought immutable SAS No. 80 is a good example of standards meeting the
challenges of time, but it is only a matter of time before even these concepts become obsolete
and a new standard will need to be envisioned.
Work Cited
Hansen, J. V., & Hill, N. C. (1989). Control and Audit of Electronic Data Interchange. MIS Quarterly,
13(4), 403. https://doi.org/10.2307/248724
Williamson, L. (1997). The Implications of Electronic Evidence. Journal of Accountancy.
Splettstoesser, I. B. (1997). Managing and auditing electronic data interchange. The CPA Journal,
67(11), 26–32.
