Impact of E-business on Auditing: Challenges and Risk Analysis

This report delves into the significant challenges confronting contemporary auditors, particularly in the context of e-business. It begins by defining auditing and its importance in ensuring the accuracy of financial statements. The paper then explores the impact of e-business on business operations, highlighting how online transactions and cloud-based accounting software have introduced complexities such as multiple compliance audits, budget constraints, and the need for efficient IT infrastructure. The report further examines the risks associated with e-business, including data security breaches, hidden costs, and website failures, and how these issues create challenges for auditors. It then discusses the identification of fraud in financial statements through data analysis techniques, emphasizing the need for auditors to analyze vast amounts of data to detect irregularities. The report concludes by summarizing the challenges faced by auditors, including the electronic nature of audit evidence and the importance of adapting to technological advancements to effectively identify and mitigate risks and fraud in the digital age. The report also provides references for further study and research.

Challenges faced by Contemporary Auditors

Table of Contents
Introduction......................................................................................................................................2
Impact of E-business on Business operations..................................................................................2
Risk faced by Business....................................................................................................................3
Fraud in financial statements...........................................................................................................3
Identification of fraud......................................................................................................................3
Conclusion.......................................................................................................................................3

Introduction
In this present paper, we will discuss the impact of online purchase and sales on the business
operations. The paper also describes the risks faced by the business, identification of risk leads to
fraud in the financial statements and the identification of fraud. Auditing is defined as the
systematic identification of books of accounts, statutory records, financial statements,
documents, and voucher to check the true disclosure in the financial and non-financial statements
of an organization. The auditing also ensures the law and regulations followed in the books of
accounts. The auditors applied the formulas and evaluate the financial reports of an organization.
The auditing becomes unambiguous due to which the academics started identifying the audit
society. The auditing helps to manage the risk through evaluating the financial and non-financial
statements which enable to control the process.
Impact of E-business on Business operations
The emergence of purchasing and selling of goods and service over the internet impacts on the
business operations. The new online technologies and internet mobile service culture has seen a
proliferation in the number of cloud based accounting software (Curtis et al., 2015). The small
organizations needs to know about the drawbacks of self-administered accounting software but it
also helps to maintain the healthy flow of an organization. Following are the five major impacts
of purchasing and selling of goods on business operations:
1. Multiple compliance audits management
The changes in the purchasing of goods and services over the internet has modifies the rules
and regulations which impacts on the auditing by following the multiple compliance

standards. It creates a challenge for Information technology department because the audit
needs to follow the multiple compliance standards.
2. Inefficient Budget
At the economic downturn, the cost cutting is become the major challenge for an
organization. The information technology department requires more man power for rebooting
the internet problem which requires more capital. So the information technology has no
particular budget due to which it creates a problem in auditing.
3. Higher priorities
The rapid increase of internet use leads to increase the compliance and dilute of data due to
which it impacts on the need of auditing.
4. Shortcomings of native auditing
The information technology department requires more budget for operating system and
others. The native auditing is mainly done for solving the problem of troubleshooting and to
maintain the essence the essence of native auditing is the challenge which is faced by the
auditors at the time of auditing.
5. Internal policies
The purchasing and selling of goods over the internet has impacted on the internal policies of
an organization which are handed down from human resource department to all the levels of
an organization. The information technology department is required to work according to the
internal policies in an effective and efficient manner. The auditors need to face the challenge
because of lacking gap between the policies and requirement of information technology
department.

Risk faced by Business
The enormous challenges are faced by the auditors at the time of auditing due to size,
information sharing, and others. The purchasing and selling of goods over the internet faced
different challenges such as data security, hidden costs, failure of marketing and availability of
website and others. The hidden costs include the cost of custom sites, hiring deliver boy and
other cost related of online transactions. The data security includes the risk of disclosing
sensitive information of an organization. The market failure is the major risk and challenge faced
by an organization which leads to the loss of financial resources (Borit et al., 2014). The web-
hosting is the big challenge for an organization which includes the risk of failure due to
mismanagement. Following are the risks which are faced by an organization while purchasing
and selling goods over internet and it creates a challenge for auditors:
1. Inaccurate data
2. Data and system confidentiality
3. Access of system and data by un-authorizers
4. Transactions non repudiation
5. Service denial
6. Difficulty in combining the IT in an organization
The biggest challenge faced by auditors in the purchasing and selling of goods over the internet
is the electronic nature of audit evidence. The sales process is recorded electronically without
producing physical output. The hard copies of all the statements are not taken for the auditing
purpose which creates a challenge for auditors (Boritz et al., 2016). The online business leads to
less manual control due to which the auditors have less available manual control. The controls

need to be integrated into the applications of electronic business. The accessing of data and
finding it is another challenge which is faced by auditors. The data analysis is also the challenge
faced by auditors.
Fraud in financial statements
The access to analyze the data helps to identify the fraud in the financial statements. The auditors
are required to access and analyze the data which is beyond traditional audit. The purpose of
auditing helps to recalculate the entire amount on order file and detection of irregulars which
helps to identify the frauds and misstatements in the financial data. The data analysis audit
evaluates the access control lists and identifies the duplicate user IDs, workstation IDs which
enable to identify the frauds through accessing the control. The auditors calculate the interest
charge in which the recalculation of 100% of interest events is calculated to compare the interest
which helps to identify the fraud and misstatements in financial statements (Laxman et al.,
2014). The objective of auditors is to verify the accuracy of all the online orders which includes
the receiving orders, captured and invoices that enable to identify the fraud easily over the online
transitions. Another objective of auditing is to access control which helps in identification of
frauds. The value added objectives of auditing includes analyzing the online orders, predication
of lost consumers, sum of money charged on marketing activities of online business which helps
to identify the frauds related to the use of fake IDs and orders. All the data source files such as
order file, invoice file, web log and others are analyzed by the auditors which enable the
identification of fraud and misstatements in the

Identification of fraud
The data analysis technique allows the auditors to access to myriad sources. The careful planning
is required for the integration of data analysis. The examination helps to avoid common pitfalls
and successful planning. The formal report is able to represent the budget and cost of the
business units which helps to identify the misstatements in the reports (Kotb et al., 2014). The
team of auditors integrates the data analysis which helps to identify the frauds and misstatements
in the financial statements. The software vendors allow assist during the whole process of
auditing which enables them to suspect each and every financial aspects of an organization.
Auditing helps to analyze the financial and non-financial statements of the company. It enables
to see the clear view of the financial position of the company. The inspection of business units
and IT helps to see regulations and rules followed in the books of accounts in an organization.
The auditing helps to recognize the invaluable part of an organization which helps to see the
screenshot of financial position of the company. The auditing helps to support the strategic
importance of the whole process. The audit management helps to implement and integrate the
data analysis which enables to improve the financial position of the company. The auditing helps
to analyze the financial statements of the company which includes the vouchers, cash books, and
other financial books which identifies the fraud and misstatements of data (Islam et al., 2014).
The auditors help to analyze the web server traffic and irregularities in the block of the data
which helps to see the misstatements and fraud such as fake IDs.
Conclusion
The auditing is used to suspect the financial and non-financial statements of an organization. It is
the systematic identification of statutory records, books of accounts, documents, books of

accounts and others. The auditors help to identify the fraud and misstatements through analyzing
the books of accounts. The purchasing and selling over the internet impact on the business
operations due to which challenges faced by the auditor. The five challenges faced by the
auditors include multiple compliance audits management, inefficient budget, higher priorities,
shortcomings of native auditing, and internal policies. The risk faced by an organization include
inaccurate data, data and system confidentiality, access of system and data by un-authorizers,
transactional non repudiation and service denial. The major challenge faced by auditors is the
electronic nature of audit evidence. The hard copies are not taken out for the specific purpose of
auditing due to which the auditors faced the difficulties in suspecting the books of accounts. The
frauds are identifies in the financial statements through data analysis by the auditors which helps
to see the clear view of financial and non-financial statements of an organization. The auditing
helps to see the entire re-calculation of order file and detection of irregularities helps to identify
the frauds and misstatements in the financial statements.

References
Curtis, E., Humphrey, C., & Turley, S. (2015). Standards of Innovation in Auditing. Auditing: A
Journal of Practice and Theory.
Boritz, J. E., Robinson, L. A., Wong, C., & Kochetova-Kozloski, N. (2014). Auditors’ and
specialists’ views about the use of specialists during an audit. Available at SSRN 2534506.
Laxman, S., Randles, R., & Nair, A. (2014). The fight against fraud: internal auditors can use
COSO components to develop and deliver an effective fraud mitigation program. Internal
Auditor, 71(1), 49-54.
Kotb, A., Sangster, A., & Henderson, D. (2014). E-business internal audit: the elephant is still in
the room!. Journal of Applied Accounting Research, 15(1), 43-63.
Islam, S., Weippl, E. R., & Krombholz, K. (2014, December). A decision framework model for
migration into cloud: Business, application, security and privacy perspectives. In Proceedings of
the 16th International Conference on Information Integration and Web-based Applications &
Services (pp. 185-189). ACM.

Boritz, J. E., & White, G. (2016). Business Models and Business Model Descriptions: A
Research Synthesis. Available at SSRN 2715555.