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Electronic Data Interchange

explanatory Essay
1231 words
1231 words
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Definition Electronic Data Interchange (EDI) can be formally defined as 'The transfer of structured data, by agreed message standards, from one computer system to another without human intervention'(Wikipedia, 2007). It represents the application of computer and communications technology to traditional paper-based business processes, supporting innovative changes in those processes. It involves the exchange and transmittal of business documents, such as invoices, purchase orders and shipping notices, in a standard, machine-processable format (CISA, 2008). EDI is not a new technology. It was first used in transportation and shipping industries in 1970s. However, EDI use has grown significantly in a many business sectors in the past decade. It is not limited to simply sending and receiving various messages but has allowed trading partners to access to each other’s internal records such as sales and inventory information. The use has come into prominence because EDI could provide the following benefits: • Less paperwork, reduced cost • Fewer errors during the exchange of information • Increased speed in information exchange and processing • Improved trading partner relationships • Improved intracompany flow of information Threats On the other hand, although EDI has created a number of changes in the way commerce is conducted and has offered significant opportunities, it also has attracted new threats and potential exposures and increased the seriousness of some existing problems. Some examples of these are described below. ... ... middle of paper ... ... and an on-line browser, businesses can link into secure EDI networks for a minimal investment. By engaging in EDI through the Internet, small and medium-sized firms can compete for business on a level playing field with large organizations; expand their market globally; and improve relationships with their current trading partners (ASCX12, 2007). Reference Wiki, 2007, “Electronic Data Interchange” http://en.wikipedia.org/wiki/Electronic_Data_Interchange Stanley Weiner, 1995, “BUSINESS RISK, INTERNAL CONTROL, AND AUDIT IMPLICATIONS OF EDI” http://www.nysscpa.org/cpajournal/1995/NOV95/Aud1195.htm CISA Review Manual, 2008 Ian Walden, 1993, “EDI audit and Control” David Moore, “Audit Implications of EDI” http://www.cica.ca/1/0/5/0/index1.shtml ASCX12, 2007, “ELECTRONIC COMMERCE ON THE INTERNET: THE FUTURE OF EDI” http://www.x12.org/x12org/about/edifuture.htm

In this essay, the author

  • Explains that edi has created a number of changes in the way commerce is conducted and has offered significant opportunities, but it also has attracted new threats and potential exposures.
  • Opines that the absence of humans from the process removes a degree of protection, since computers are incapable of applying curiosity or common sense to instructions.
  • Explains that paperless trading carries its own advantages, and corresponding security problems. the absence of hard copy evidence in support of business transactions has serious implications both from a legal standpoint and from an auditor’s perspective.
  • Explains that edi reduces the segregation of duties and limits the number of personnel involved with individual transactions. control of internal systems and procedures may be limited to a few people.
  • Explains that proprietary information, such as customer lists, price lists and manufacturing schedules, could fall into a competitor's possession.
  • Explains that edi is becoming a crucial part of everyday business activities. trading partners are offering discounts to their customers if they convert.
  • Defines electronic data exchange (edi) as the transfer of structured data, by agreed message standards, from one computer system to another without human intervention.
  • Explains that if any part of the system fails, management would face problems related to transactions that have to be completed by set due dates.
  • Opines that proper controls should be placed to protect edi transmissions. transaction authorization is a major concern.
  • Explains that edi can be a culture shock for auditors, since it increases the dependence of organizations on computer-based information systems for essential operations.
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