Question

“Electronic transactions lead to “Threat to intellectual property and privacy risks”.

Answer 1

AnswEr :-

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, in the midst of 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.