Which of the following is likely to be a benefit of electronic data interchange EDI)?
Answer(s): B
Electronic data interchange is the electronic transfer of documents between businesses. EDI was developed to enhance just-in-time JIT) inventory management. Advantages include speed, reduction of clerical errors, and elimination of repetitive clerical tasks and their costs. Improved business relationships result because of the mutual benefits conferred by EDI.Accordingly, some organizations require EDI.
Which of the following is an accepted example of electronic data interchange?
Answer(s): D
EDI is the communication of electronic documents directly from a computer in one entity to a computer in another entity. Placement of order entry transactions from a customer to its supplier is an accepted use of EDI between trading partners.
An internal auditor was performing an operational audit of the purchasing and accounts payable system. The audit objective was to identify changes in processes that would improve efficiency and effectiveness.Which of the following statements support the auditor's recommendation that electronic data interchange EDI) be implemented within a company?I). There is a small number of transactions.II). There is a time-sensitive just-in-time purchase environment.III). There is a large volume of custom purchases.IV). There are multiple transactions with the same vendor.
EDI is advantageous in a JIT environment because it provides the capacity for instantaneous ordering. Moreover, a JIT environment already is characterized by the close vendor-purchaser cooperation required by an EDI system. Another reason for implementing an EDI system is that the purchaser has a large volume of transactions with the same vendor(s). Otherwise. EDI may not be cost efficient.
The auditor determined that the risks associated with the EDI purchases were less than the risks associated with the purchases made through the traditional system.Which one of the following factors best supports this prioritization of risks?
Answer(s): C
Sound controls mitigate the risks associated with EDI). The question states that the internal auditing department's prior involvement consisted of assessing and testing the EDI system. This review found no significant problems. Accordingly, the risk of the EDI system is decreased.
In a review of an EDI application using a third-party service provider, the auditor should:I). Ensure encryption keys meet ISO standardsII). Determine whether an independent review of the service provider's operation has been conducted.III). Verify that only public-switched data networks are used by the service providerIV). Verify that the service provider's contracts include necessary clauses, such as the right to audit
An auditor should review trading partner agreements and contracts with third-party service providers. These documents should contain necessary clauses and appropriately limit liabilities. Moreover, legal counsel should have reviewed the agreements or contracts. An auditor should also determine whether the third- party service provider's operations and controls have been independently reviewed e.g., by public accountants).
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