Auditing E Commerce Industry
Auditing E Commerce Industry
Auditing E Commerce Industry
(E-commerce) Industry
Prepared by:
Jennifer Bio
Shenjie Mhar Bogñalbal
E-commerce(or electronic commerce) is the buying and selling of
goods ( or service) on the internet. It encompasses a wide variety of data,
system, and tools for online buyers and sellers, including mobile
shopping and online payment encryption. Most businesses with an
ecommerce presence use an ecommerce store and/or an ecommerce
platform to conduct online marketing and sales activities and to oversee
logistic and fulfillment.
Types of e-commerce
1. Business to Consumer (B2C)
2. Business to Business (B2B)
3. Direct to Consumer (D2C)
4. Consumer to Consumer (C2C)
5. Consumer to Business (C2B)
Here are some example of types of e-commerce
• Retail
• Drop shipping
• Digital products
• Wholesale
• Services
• Subscription
• Crowd funding
Benefits of e-commerce
• Convenience
• Personalization and customer experience
• Global marketplace
• Minimized expenses
Disadvantages of e-commerce;
1. Limited costumer service.
2. Lack of instant gratification
3. Inability to touch product
Audit considerations
E-commerce, or e-business, via the internet is now bringing fundamental changes to the
way business is conducted. The continued evolution of technology, the economics of the
internet, and the growth of e-commerce are significantly affecting the traditional
business environment. E-commerce is changing the competitive market and making
international trading viable for a much larger number of businesses.
However, during these changes in the business environment, the auditor's responsibility to
provide an opinion on the financial report has remained unchanged. Although
communication and transactions over networks and through computers are not new
features of the business environment, the increasing use of the internet for e-commerce
introduces new variables of risk and control requiring audit consideration. E-commerce is
not clearly defined or constrained but comes with 'open boundaries' in terms of scope. The
auditor requires appropriate skills to understand how an entity's e-commerce strategy
addresses the business risks that arise. Audit risk assessment for e-commerce requires a
paradigm shift in the way auditors consider client entities and the way auditors plan
audit procedures to reduce audit risk to an acceptable level.
When a business engages in e-commerce, it runs many new risks. The internet provides every
entity with the opportunity to trade in a global market. But when transactions are initiated by
unknown parties on the internet, there are risks relating to the authenticity and integrity of
trading partners and e-commerce transactions. Usually, management will identify e-
commerce business risks, and address those risks with appropriate security and control
measures. In contrast, the auditor will consider e-commerce business risks only in so far as
they affect audit risk. Audit risk relates to the risk that the entity's financial report (on which
the auditor provides an audit report) is materially misstated.
A business may be faced with a number of constraints when developing e-commerce,
including the availability of appropriate technical and marketing expertise, the need for
continuing investment, and the identification and resolution of security issues.
Although these issues may remain unresolved, many entities are continuing to develop e-
commerce on a 'risk-reward' basis. As a result, the e-commerce market is growing rapidly,
particularly the use of e-commerce on a business-to-business (B2B) basis to shorten
supply lines and reduce costs. Such growth, without due attention to the risks in an electronic
trading environment, impacts on both business risk and audit risk
E-commerce business risks include those arising
from:
1. the identity and nature of relationships with e-commerce
trading partners;
2. the integrity of transactions;
3. electronic processing of transactions;
4. systems' reliability
5. privacy issues;
6. return of goods and product warranties;
7. taxation and regulatory issues.