Electronic Data Interchange (EDI) refers to the computer-to-computer exchange of business documents (such as purchase orders, invoices, and shipping notices) in a standard electronic format between business partners.
Correct Answer (D - Use of Electronic Data Interchange)
EDI enables real-time, automated business transactions between companies, reducing errors and increasing efficiency.
The IIA GTAG 8: Audit of Inventory Management highlights EDI as a critical system for supply chain and procurement operations.
Why Other Options Are Incorrect:
Option A (Use of a Central Processing Unit - CPU):
A CPU is a hardware component, not a method for exchanging business documents.
Option B (Use of a Database Management System - DBMS):
A DBMS stores and manages data but does not facilitate external document exchange between trading partners.
Option C (Use of a Local Area Network - LAN):
A LAN connects computers within an organization but does not enable document exchange between separate businesses.
IIA GTAG 8: Audit of Inventory Management – Discusses EDI as an essential tool for automating business transactions.
IIA Practice Guide: Auditing IT Controls – Recommends EDI for secure and efficient document exchange.
Step-by-Step Explanation:IIA References for Validation:Thus, D is the correct answer because EDI is the best system for automated, computer-to-computer business document exchange.
