Description
You are a manager in the computer audit section of Arthur & Anderson, a large auditing firm. You
are currently concerned with the audit of Wangezi (Pty) Ltd, a distributor of computer components,
software and accessories. Wangezi (Pty) Ltd uses EDI (Electronic Data Interchange) to conduct
business with a few of its trading partners. All EDI communications take place through a VANS
(Value
Added
Network
Service).
Ryan Chriss, the partner in charge of the audit of Wangezi (Pty) Ltd has asked you to assist in the
audit of this company and has indicated that he would like you to begin by considering the EDI
system as it relates to the revenue and receipts cycle. Initial investigations and enquiries of Muhle
Mankin (financial manager), in this regard have revealed the following details.
1. Retailers who require stock, transmit their orders to Wangezi (Pty) Ltd, using EDI. All retailers
who are recognised EDI trading partners, are noted as such in Wangezi (Pty) Ltd’s online debtors
masterfile.
2. Dumi Dlamini (chief debtors clerk) converts the order to an “order acceptance” advice by keying
in additional fields on the order and sending it back to the retailer concerned, using EDI. This is
followed up by despatch of the required stocks to the retailer. Wangezi (Pty) Ltd also has an online
stock masterfile.
3. When retailers receive the stocks ordered, they notify Wangezi (Pty) Ltd of deliveries received
and accepted, by keying in further fields to convert the “order acceptance” advice to a “delivery
acceptance” advice and sending it back to Wangezi (Pty) Ltd, again using EDI.
4.Once the retailer has acknowledged the receipt of goods, invoices can be generated automatically
by the system, by the insertion of additional fields to convert the “delivery acceptance” advice to an
invoice.
The
invoice
is
transmitted
to
the
retailer
using
EDI.
Muhle Mankin has also indicated to you that the company is considering the use of the internet to
expand its current level of electronic commerce activities. He is optimistic that the Internet could be
used as a better and more economical communication channel for EDI than the current system which
relies on a VANS. He is, however, anxious to hear your views on this matter.
YOU ARE REQUIRED TO:
(a)Discuss the controls which you would recommend, to ensure the validity, accuracy and
completeness of invoices which would be automatically generated by the system described above.
You are only required to consider controls which should be in place from the point at which the
“delivery acceptance” advice is fetched from the VANS onwards.
(10)
(b) Provide a brief overview of the controls which should be in place over amendments to the debtors
and stock masterfiles.
(4)
(c) Respond to Muhle Mankin’s enquiry regarding the use of the Internet for electronic commerce
by discussing:
i.
Advantages which the company may derive by launching a Worldwide Website for
commercial purposes;
(3)
ii.
iii.
The impact on risk because of conducting EDI over the Internet, rather than using a
VANS, as is currently the case; and
(4)
Firewalls and the role they can play in addressing risks which arise because of conducting
electronic commerce over the Internet.
(4)
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