The challenges facing by contemporary auditors

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Accounting Assignment Question

You are required to consider the challenges facing contemporary auditors due to the increasing use of technology by businesses:
 
1. What impact does the purchasing and selling goods over the internet (both locally and internationally) have on business operations? 
2. What are the risks businesses face due to purchasing and selling goods over the internet?
3. How might the risks identified in point 2 above lead to fraud or misstatements in the financial statements?
4. How can auditors go about identifying the fraud or misstatements you have identified in point 3. 
 
 
Accounting Assignment Solution

E-commerce has introduced the change in the business environment where the sales proceed in a virtual path. The fundamental changes in doing business have seen over the internet by the last decade. However, the variables in business risks and the variables of risks in e-commerce are different from that of the traditional one. Therefore, the auditors have to find and assess those risks in their audits as part of their responsibilities. The essay will address all these sections by explaining the possible material misstatements in an e-commerce business. The essay will also explain the basics of online business by showing the impact of transactions over the internet.

Impact of selling and purchasing goods over the internet on business operation

The online business has a tremendous impact on business. It is one of the most used technologies in business – both in retail as well as in the B2B market. The main goal of e-commerce is to take advantage of cost minimization by finding the customers directly. However, the regular changes in technologies have shifted the e-commerce volatile in many times. The online purchasing and selling of goods have a major influence on the procurement cycle of a business. According to Gunasekaran et al (2002), online procurement has reduced the time of the total time of ordering and supply by the usage of the online catalog and online payment process. He also stated that cost minimization has become possible due to low stock in inventory and manufactured products via procuring the goods over the internet. It has provided the business with an opportunity to interact with the worldwide market in a fraction of the time and cost of that of the traditional procurement process. The major development is observed in the manufacturing process. The companies are shifting their operation strategy from mass production to demand-based production by applying e-commerce in their operation. Hua (2016) saw that manufacturers can arrange sub assemblers at 80% lower time and at a 20% reduced cost. Thereby, fast and regular communication has reduced the cost of procurement as well as the manufacturing of products. The reduction of cost in the holding of inventories is possible due to a tendency of making the procurement policy towards just in time of the renowned companies in the world. They are using e-commerce technologies to reduce their expenses and the time of blocked funds in the business.

The service sector had already used the internet and digital technologies in their businesses. The days before the internet, there were private lines for the financial sectors to communicate and exchanging information regarding financial transactions. However, they are using the internet now a day to reduce their cost as it has provided them to reach the customers without any customized software (Lu 2014). The service industries like traveling and real estate are using the internet to deliver their service information to the customers by email………………………

 
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