Electronic commerce, and more broadly electronic business, has seen amazing growth in the past 15 years. With the introduction of Web browsers that incorporated user friendly graphic interfaces, E-commerce saw the beginning of its amazing growth. While talking about e-commerce and e-business, it is important to understand that there is a difference between the two. E-commerce is the process of exchanging goods and services over an electronic means, most popularly done over the Internet. E-business is the total activities a business engages in over the Internet, this includes e-commerce. Simply e-commerce is a small part of the makeup of e-business.
With the CPA firms understanding of e-business, they are able to offer services to companies that spawn from the application of e-business in operation. These three services are design and implementation of software for e-business, integration with legacy accounting systems, and website hosting. CPA firms may retain their independence under certain conditions when they design, implement, or integrate e-business software. Hosting a web site will cause an auditor to lose their independence because outsiders will doubt their independence.
The gain in popularity of e-commerce among companies has led to necessary changes in the way that CPA firms conduct audits on these companies. The use of computers has been prominent in accounting for the past 40 years, so CPAs are proficient and experienced in audit electronic data and records. The use of this knowledge lets CPAs to choose to audit around the computer, essentially treating it like a black box. With the advent of better technology, audit tests can be performed in a cheaper and more effective manner than before. These changes have improved the method of auditing through the computer. Even with these improvements the approach to auditing has changed when applied to e-commerce. These changes can be seen in the audit trail, internal controls, audit risk, and the shift from traditional auditing to continuous auditing.
With the emergence of more businesses using electronic commerce, there was a going concern as to how auditors would be able to collect evidence with no audit trails being produced. An audit trail will depend on purposeful system design and implementation of processes to record events that have occurred on a computer-based system. Instead of relying on the audit trail that exists in the application system, concurrent audit techniques may be used. Concurrent audit techniques are used to collect audit evidence when a transaction is processed. Some examples of concurrent audit techniques are, integrated test facility, snapshot/extended record, and system control audit file. Concurrent auditing was developed many years ago even though their implementation was not until current years due to the widespread use of electronic systems.
An Integrated test facility is a process where a dummy company is established on an application system’s files and processing the audit test data against the entity as a means of verifying the processing authenticity, accuracy, and completeness. After processing test transactions, the auditor would review the auditor output for expected results. The test data will include all kinds of transaction errors and expectations that are subjected to the same controls as the actual data. ITF is considered a useful tool in auditing because it uses the same programs to compare dummy results against the entity’s system to verify processing accuracy. One of the main concerns of an ITF is that the transactions affect the results of an application system. Therefore it is important to remove the dummy transactions once testing has completed.
A snapshot/extended record assists with the transaction walkthroughs and creates pictures of the transaction as it flows through the application. This software is typically embedded where auditors believe important processing occurs. The goal of the...
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