Understanding E-Commerce Systems and Their Financial Impact
E-commerce systems, including electronic data interchange (EDI) and electronic funds transfer (EFT), streamline procurement and payment processes.
The main financial effect of implementing such a system is the acceleration of accounts payable transactions.
This is because automated purchasing systems allow businesses to place orders faster and in larger volumes, leading to an increase in outstanding liabilities (accounts payable) before payments are settled.
Why Option D is Correct?
Higher accounts payable occur because:
EDI automates order placement, leading to more frequent and possibly larger purchases before payments are processed.
EFT may improve payment processing speed, but it does not eliminate outstanding payables immediately.
Suppliers may extend credit terms, increasing the organization's short-term liabilities under accounts payable.
IIA Standard 2110 – Governance requires internal auditors to evaluate how technology changes impact financial controls, including accounts payable management.
COBIT 5 Framework – AP Processes emphasizes that auditors should monitor financial system integration risks, including liabilities like accounts payable.
Why Other Options Are Incorrect?
Option A (Higher cash flow and treasury balances):
E-commerce improves transaction efficiency but does not necessarily increase cash flow. It may even reduce available cash due to frequent automated purchases.
Option B (Higher inventory balances):
EDI can reduce inventory levels due to just-in-time (JIT) ordering, rather than increasing them.
Option C (Higher accounts receivable):
Accounts receivable refers to money owed to the organization, but e-commerce impacts payables (money owed by the organization) more directly.
E-commerce accelerates order processing and supplier payments, increasing accounts payable balances before payment cycles are completed.
IIA Standard 2110 and COBIT 5 stress financial controls, including monitoring accounts payable risks.
Final Justification:IIA References:
IPPF Standard 2110 – Governance
COBIT 5 – Accounts Payable Controls & Risks
ISO 20022 – Financial Messaging Standards (for EDI & EFT Transactions)
