The Impact of E-Commerce on the External Audit Process

The Impact of E-Commerce on the External Audit Process

Introduction

Technology is here with us, it is here to stay, and therefore adopting technology has become a trend in many sectors of the economy. Despite the adoption of technology as a trend, it has proved to be the only way to survive in this competitive environment. Competition in all sectors of the economy has made adoption and use of technology a major feature. Technology has therefore been applied in marketing, processing, manufacturing, and other sectors of the economy. This report investigates the application of technology in commerce with e-commerce being the focus.

The economy is never a complete field without buying and selling and in particular, the two activities form the main features of the economy. Buying and selling constitute the broad subject of commerce and in this case, buying and selling include buying and selling of goods and services. The internet has also become an important tool in business, especially the use of the World Wide Web. E-commerce refers to the trade carried out over the internet and especially on the World Wide Web. E-commerce is not only involved in the selling of goods and services but also deals with the entire marketing process. The marketing process includes sales promotion, selling, after-sales service, delivery, and payment (Anderson & Best 2004). Recently the volume of trade carried out electronically has grown tremendously due to the increased use of the internet and other world web-supported services.

External audit refers to audit services given to a firm by an independent accountant. The services include an evaluation and analysis of the firms accounting records to determine their credibility and accuracy. The external audit also seeks to establish whether the accounting records are complete and done on time. The audit process also seeks to establish whether a firm’s accounting records are by GAAP provisions. Finally, an external audit seeks to establish whether the accounts reports of a firm represent an accurate picture of an organization (Benbasat & Moore 1991).

E-commerce not only has an impact on trade and marketing but also on the audit process and therefore it has an impact on external audit. This paper presents a report on the impacts of e-commerce on the external audit process. The report examines whether the adoption of e-commerce has made the audit process easy. Secondly, the paper examines the security concern on the data obtained from e-commerce accounting records. Finally, the paper examines what is next after e-commerce whether we should go on and have an e-audit (Halper & Vasahelyi1991).

Findings

Impact on human involvement

Abu (2002) defines e-commerce as a trade whose information is carried through telephone lines, computerized networks, or other technical dependent means. Abu Fara goes on to add that e-commerce is not only a discipline but also a world of communication and therefore it has become an essential part of modern trade. From this definition, e-commerce eliminates or reduces human involvement in the trading process. It was found that reduced human interference implied reduced chances of errors and mistakes in accounting records. Reduced human interference also implies that the accounting records kept are free from personal exaggerations and therefore external auditors obtain credible information. Although human services are essential in commerce, human involvement in the process has been linked with the source and cause of errors that currently exist in the sector. Human beings are also fond of exaggerating an event or record of an event for their selfish gains. This exaggeration also applies in keeping account records since firms will include figures that do not reflect their business condition. It was found that most firms and organizations entered wrong information in account records mainly to protect the financial image of their business. Firms also exaggerated their accounts records to escape taxation (Jones & Xiao 2003).

The above are some of the main problems that were observed to result from man’s involvement in account record keeping. These problems not only stand at the business level but also spread to the operations of the business and finally into the audit process. With the increase in the application of e-commerce, things were found to be very different and the difference was felt in the audit process. As stated by Serafi (2005) e-commerce as a process involves the automation of business transactions using a computerized system. This statement implies that e-commerce enhances accuracy in account keeping through automation. Accurate account records are essential in the auditing process and therefore external auditors will prefer data from a reliable source. Data from electro