The audit implications of electronic commerce with particular reference to Malta

Abstract

The purpose of this dissertation was to identify the key issues affecting the year-end financial audit of an organisation that derives its business in part or in full from electronic commerce. An evaluation of the characteristics of this type of client organisation highlights the issue of security, which is the fundamental aspect that carries the most impact on the audit. The added risk introduced by the extinction of the traditional paper trail is observed in the audit approach adopted when auditing an electronic commerce organisation. The main issues challenging the audit in this regard are discussed together with a report on the current developments that are emerging to assist the auditor in dealing with these issues. The local perspective was sought through a series of interviews held with Maltese audit firms. The aim of the research was to observe the practical issues involved in auditing an organisation that engages in electronic commerce. These included the impact the electronic commerce activity has on the risk assessment of the client, the manner in which the audit is approached and the influence this carries on the type of testing carried out. The need for guidance on the issues at hand was also discussed in the interviews. The results of this research are presented in this dissertation and a number of recommendations are put forward based on these findings. The study also suggests further areas of research. This dissertation has shown that although electronic commerce activity is currently minimal in Malta, the audit firms are aware of the implications it carries on the audit. This makes them ready for the challenges that lie ahead in the eventuality of an increase in this type of audit client.