Implications of EDI and Image-Processing Systems on Audit Evidence
Please respond to the following post: state whether you agree or disagree with the implications provided by your classmate. What additional implications do you think EDI and image-processing systems will have on audit evidence?
EID is an electronic data platform which alleviates the need for paper, such as invoices and purchase orders (Helms, Mancino,1998). Companies such as a food distributor and a farm have a business agreement to use a specific standard of data format to conduct routine business transactions. When inventory of the distribution is low the EID will send a request for more raw materials from the farm. Alternatively, the farm can send an invoice for payment electronically and with minimal employee interaction.
Implications
The auditor would need to have a high level of understanding of the EID and the company they are auditing. Since the EID is connected with another company, they are dependent on each other, and any errors can cause problems for both companies. Some problems that can happen are coding errors, miscounts of inventory and security risks. For example, if the receiving company had an employee theft of inventory and they tried to cover it up in the EID this can result in too much or too little raw materials being sent, which would affect revenue and accounts receivable (Helms, Mancino,1998).
Image- Processing System
Image- processing system is the conversion from paper documents to electronic documents (Helms, Mancino,1998). Original hard copy documents can be scanned and stored as an electric document/ image. The original paper copy is then destroyed or discarded. The electronic document can then be sent to many very quickly and not held back by having only one paper copy.
Implications
The biggest problem with scanned copies is the authenticity of the document. The image can be distorted or manipulated to show only what the individual wants others to see. Auditors need to take this into consideration and adjust their audit plan accordingly. For example, if a bank confirmation for account balance is requested by the auditor, the company could take an old one, manipulate for current period and send it to the auditor. Other security risks the auditor needs to be aware of are document storage, access to the documents, and computer/server security to protect the documents from outside users. The audit plan should include tests of security controls.
Peer Response
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Peer Response
I agree with Lee's implications concerning image processing and Electronic Data Interchange (EDI) systems from the audit evidence viewpoint. For the EDI systems, the auditors’ urge to maintain a better understanding of the technological elements and particular processes of a company they are auditing is vital. The systems can promote transaction efficiency across businesses but are always vulnerable to errors and manipulation. Also, the interdependence between two organizations utilizing EDI implies that any deceptive actions or discrepancies performed can significantly influence them. Using the systems presents critical security risks, especially when data manipulation happens to conceal irregularities and disparities, tampering with financial reporting (Arora et al., 2019). As noted, the example instance concerning worker theft of inventory and its possible influence on revenue, resources, and accounts receivable indicates the relevance of the auditor's vigilance when dealing with audit evidence generated electronically.
Image processing tools p...