5.

0 Performance evaluation Parameters for E-Commerce

5.1 Audit
5.2 Types of Audit
5.3 Audit Report
5.4 Audit Functions as a Performance Measurement Tool
 E-Commerce Business
• An eCommerce business is a business model which let
the companies set up their business on an electronic
network. Rather than displaying products in a physical
store, a businessman put the products or services
he wants to sell on a website on the internet.
• As eCommerce business is easy to set up and does not
require too much investment to set up companies of all
sizes can set up an eCommerce business.
• eCommerce businesses are the need of the hour and
almost all small and large companies are taking their
business online to increase their sales and to compete
with the business online.
 Features of E-Commerce business

• Large customer reach

• Universal standard
• Interactive platform
• Rich in content and information
• Information density
• Personalization
• Reporting tool
• Promotional and discount code tool
• Integrated Blog and articles sectionp
 What is a Buisness Metric?

• A metric is any quantifiable, consistently defined

measurement of website performance. Examples of
relevant ecommerce metrics range from conversion
rate to average order value, from cart abandonment
rate to traffic sources.
• The list of ecommerce metrics is long, and for good
reason. Google Analytics, social media, online store,
product pages, homepages, checkout and shopping
carts — all of these are rich data sources that capture
quantifiable data, ripe for your interpretation and
trend measurement over time.
 What is a KPI?

• KPI stands for key performance indicator.

While a metric is any quantified
measurement, a KPI is an important metric.
These are the numbers that you track for
growth.
• While site visits may be important, orders
could be your KPI. Usually a handful of
critically important numbers is how you’re
being evaluated. These are your KPIs.
 Traffic Metrics
• You can’t have a buyer if they don’t get to your site.
Now that they’re aware of your brand, there are
metrics that measure getting customers to the site.
There are many, metrics in this phase of the funnel.
• Email click-through
• Email click-through rate is how many of your email
subscribers (who’ve received the email AND opened it,
which are other metrics) clicked through to your site.
• You can positively impact this by creating well-designed
emails (including mobile-friendly design), strong calls-
to-action, and good subject lines.
 Conversion metrics.

• Now that you’re lucky enough to have a visitor

to your store, how can you measure your
performance in converting them from a store
visitor to a paying customer, adding products
to their shopping cart and actually checking
out? These metrics should help you do just
that.
• Shopping cart abandonment rate
• Abandonment can be measured in a few different
ways, which is helpful to measure site behaviors.
Shopping cart abandonment is a measure of how
many people add something to their cart but
LEAVE your site WITHOUT making a purchase.
This measure is important to see if there are
hitches in the site or cart process before they get
to the checkout process.
• Checkout abandonment
• Separately, checkout abandonment is a critical metric
of how many people leave your site WITHOUT making
a purchase BUT ONLY AFTER they begin the checkout
process. While similar to shopping cart abandonment,
it’s important to measure them separately to see if the
checkout process is the root cause of abandonments or
if the problem is something else entirely.
• Your abandonment rates can be improved primarily by
intuitive cart management, which includes persistent
pages, urgency messaging, saving customers carts, etc.
• Micro to macro conversion rates
• This is an interesting approach to identifying activities
of particular importance for measurement. Basically a
micro and macro conversions are small (micro)
activities that lead to bigger (macro) activities.
• These are similar to the abandonment rates, but can
give you an opportunity to measure activities you
consider important to your funnel, such as the number
of visitors who click to a product detail page, or the
number of visitors who opt-in as an email subscriber.
• Average order value (AOV)
• Your AOV is the average price your customers are
paying for the items in their cart when they check
out. It can, and should, be measured over time,
so you can determine how it evolves. It’s an
important measurement to know as it relates to
measurements of marketing effectiveness.
• Sales conversion rates
• This is the total number of sales divided by the
total number of sessions to your store.
 Various
KPI used by E Commerce industry
• https://www.bigcommerce.com/blog/ecomm
erce-metrics/#understanding-customer-stages
5.1 Auditing:
A) Meaning:
An Audit is an evaluation of a person, organization system, process, enterprise, project
or product. The term most commonly refer to audits in accounting. Auditing is a
thorough, systematic and analytical examination of accounting record of the client.

B) Definitions:
1) The Institute of Chartered Accountants of India:
“Audit is the independent examination of financial information of any entity, whether
profit oriented or not and irrespective of its size or legal form, when such an
examination is conducted with a view to expressing an opinion thereon”.

3) J. R. Batliboi :
“Auditing is an intelligent and a critical scrutiny of the books of accounts of a
business with the documents and vouchers from which they are written up, for the
purpose of ascertaining whether the working results for a particular period, as shown
by the profit and loss account and also the exact financial condition of that business,
as reflected in the balance sheet are truly determined and presented by those
responsible for their compilation”.
5.1 Auditing:
C) Objectives of Auditing:

Objectives of Auditing

Primary Secondary Specific

Objective Objectives Objectives

Detection and Detection and

Prevention of Prevention of
Errors Frauds
5.1 Auditing:
C) Objectives of Auditing:
1) Primary Objective:
The primary objective of an auditor is to express opinion on every profit and loss
account and balance sheet of a company presented to him during the period of the
auditor ship.
2) Secondary Objectives:
The secondary objectives of an auditor are detection and prevention of errors and
frauds. This is explained below:
a) Detection and Prevention of Errors :
Error is basically a mistake committed by a person innocently i.e. without any
dishonest motive. Errors are classified as below:
i) Clerical Errors :
These are the errors of omission - may be partial or total, totaling errors, errors in
posting.
ii) Errors of Principles :
These errors are committed when accounting principles are violated while passing
entries in the books of accounts.
5.1 Auditing:
C) Objectives of Auditing:
2) Secondary Objectives:
b) Detection and Prevention of Frauds :
Fraud is basically an error committed purposefully with dishonest motive on the part
of person committing it. Frauds are broadly classified into the following three types.
These are briefly explained below:
i) Frauds Relating to Goods :
It is also called as misappropriation of goods. It implies theft of goods, issuing fake
credit notes to customers or any other misuse of goods belonging to the business.

ii) Frauds Relating to Cash :

It is also called as misappropriation of cash. It is possible that some employees
employed to handle the cash and responsible for recording of cash transactions in
the books of accounts may use business cash for their own use.

iii) Fraudulent Manipulation of Accounts :

This is one more intelligent method of committing a fraud. It is generally
committed by some responsible persons in the organization. It is also called as
window dressing.
5.1 Auditing:
C) Objectives of Auditing:
3) Specific Objectives :
In addition, to the main and secondary duties, auditor may be engaged to perform
some specific task such as investigation of particular case, propriety audit, test audit,
cost audit, etc. These are the specific audit assignment covered by some other Acts.

D) Features of Auditing:
5.1 Auditing:
F) Principles of Auditing:
5.1 Auditing:
F) Principles of Auditing:
1) Integrity, objectivity and independence:
The auditor should be straight forward, honest and sincere in his approach to his
professional work and should maintain an impartial attitude.

2) Confidentiality:
The auditor should respect the confidentiality of information acquired in the course
of his audit work.

3) Skills and Competence:

The audit should be performed and the report should be prepared with due
professional care by persons who have adequate training, experience and
competence in auditing.

4) Documentation:
The auditor should maintain documents which are important in providing evidence
that the audit was carried out in accordance with the basic principles.
5.2 Types of Audit
The entire process of auditing depends upon the types of audit therefore, it is essential to
study the various types of audit. Auditing is broad process, therefore audit classified in
different types.
A) Internal Audit :
Audit is an independent examination of books of accounts, vouchers and related
documents. It is compulsorily done by an independent statutory auditor. However, when
organization on its own conducts audit exercise through an independent agency it is
called as ‘internal audit’. Generally, in large organisations a separate internal audit
department is established to control its operations. Internal audit has been defined by
Prof. Meigs as “Internal auditing consists of a continuous, critical review of financial and
operation activities by a staff of auditors functioning as full time salaried employees”.

a) Objectives of Internal Audit:

The scope and object of internal audit vary from business to business. Following are
some objectives of internal audit:
1) To verify accuracy of the records.
2) To facilitate prevention and detection of frauds and errors.
3) To improve the system of internal check.
4) To examine the protection given to fixed assets.
5) To make investigations for management.
6) To review the entire system of working and make it more effective.
5.2 Types of Audit
A) Internal Audit :
b) Principles of Internal Audit:
Following are the basic principles of internal audit:

Confidentiality

Communication

Organisational
status of Internal
Audit
5.2 Types of Audit
A) Internal Audit :
b) Principles of Internal Audit:
Following are the basic principles of internal audit:
1) Organisational status of Internal Audit:
Internal audit can be successful only if it has the full support of the top management.
Internal auditors are inter-organisation consultants who do not have the authority to
give orders what is to be done and how. The management always bears the
responsibility to implement the recommendations.
2) Communication:
In order to be able to assist and support the management, the internal auditors must
have open communication lines with the top management. Continuous discussions
(formal and informal) must be held between the two parties. This is one of the ways for
the auditors to keep abreast with the latest development in the organisation and to
focus right things. The more information auditors have the better they can discharge
their duties.
3) Confidentiality:
Internal auditors frequently have access to information which may be considered
sensitive from a commercial, political or security point of view. The internal audit
department and its personnel must exercise due professional care to ensure that such
information is properly safeguarded and thus should establish procedures and controls
to assure the physical security of working papers.
5.2 Types of Audit
B) Final / Periodic Audit :
It is also known as periodical audit. It generally starts after the completion audits
of accounting year when the books of accounts are balanced and closed. Final
audit is carried out continuously until it is completed. It is a past accounts audit. In
case of this audit, the auditor visits the client’s place only once and remains there
till the audit is over. This type of audit is appropriate for smaller business concerns
because it is less expensive. It is also suitable where the chances of frauds are less.
This type of audit is generally preferred by the auditors because the chances of
alteration of figures are less.

Advantages of Final Audit:

a)Less expensive.
b) No disturbance of routine work.
c)No chances of alteration of figures.
d) Proper planning of audit work is facilitated.
5.2 Types of Audit
C) Interim Audit :
It is a kind of audit which is conducted between two annual completed auditors or
final audits. It is conducted to find out the interim profit and know the financial
position at the end of a part of the accounting year.

Advantages of Interim Audit:

1) Detection of errors and frauds : The chances of frauds are reduced and also there is a
faster detection of errors and frauds.
2) Removal of defects : The management can take timely action to remove the defects, if
any.
3) Declaration of Interim Dividend : It helps in declaration of interim dividend.
4) Moral check : There is a moral check on the client’s staff as the auditor examines the
accounts after six months.
5) Up-to-date accounts : Up-to-date accounts can be prepared half yearly and used by
banks and investors for taking decisions regarding loans and investments.
6) Speedy final audit : If an interim audit has been carried out, completion of final audit
would be speedy.
7) Utilization of audit staff : Audit staff can be utilized in a better manner. The work can
be done by the employees when they are free.
5.2 Types of Audit
D) Special Audit :
As per Companies Act, the Central Government has power to direct special audit
under the following circumstances:
a) When the financial position of the company is such as to endanger its
solvency.
b) When affairs of any company are not managed as per the sound business
principles.
The Central Government decides the terms and conditions and scope of audit work.
The government gives directives to the company on the basis of the auditor’s report.
The special auditor will have the same powers and duties as provided in the act. The
report will include all matters required to be included in an auditor’s report. The
report will also include statements on any other matter as may be directed by the
Central Government.
5.2 Types of Audit
E) Cost Audit :
It is a type of audit which involves verification of cost records maintained by the
organization. As per Companies Act, the Central Government may direct an audit of cost
records by a person who is qualified. The auditor reports to the government, the copy of
the report is sent to the company.
a) Objectives of Cost Audit:
Cost audit aims at bringing out the weaknesses, if any, in the cost accounting system and
to disclose probable inefficiencies in all facets of operations and performance. The main
objectives of cost audit are as follows:
1) To establish the correctness of cost records and accounts,
2) To ensure adherence to the cost accounting plan,
3) To serve as an effective tool of cost control,
4) To protect the interest of the consumers by ascertaining true cost and fair selling
price of the products manufactured,
5) To examine whether the cost statements present a true and fair view of the cost
information,
6) To check wastage of materials and labour,
7) To assist management in fixing the responsibility of employees and improve
performance by highlighting deficiencies or inefficiencies in the use of material,
labour and machines,
8) To act as a moral check on the staff associated with cost accounting and keep them
vigilant while performing their duties.
5.2 Types of Audit
E) Cost Audit :
b) Principles of Cost Audit:
These are following:

Planning and Independen

ce of Cost Technical
Performing
Cost Audit Auditor Standards

Code of Integrity and Professional

Competence
Ethics Objectivity and Due Care

Engagement
Professional in Other
Confidentiality Behaviour
Occupation
5.2 Types of Audit
E) Cost Audit :
b) Principles of Cost Audit:
These are following:
1) Planning and Performing Cost Audit:
On the one hand, the cost auditor has to safeguard his independence and professional
status in planning and performing the cost audit, ensuring quality and standard of cost
audit, as required by his professional body, the ICMAP, as well as by the Companies
Ordinance 1984, and the Companies (Audit of Cost Accounts) Rules, 1998, and other rules
regulating his audit engagement and reporting.
2) Code of Ethics:
Cost Auditor should comply with the “code of ethics for professional accountants.”
3) Independence of Cost Auditor:
The independence of the cost auditor is largely covered by the Companies (Audit of Cost
Accounts) Rules 1998, under which a person who has or had specified relationships, which
go to mar his independence, cannot be appointed as a cost auditor.
4) Integrity and Objectivity:
Integrity implies not only honesty but fair dealings and truthfulness. The principle of
objectivity imposes the obligation on all professional accountants to be fair, intellectually
honest and free of conflict of interest.
5) Technical Standards:
A professional Cost and Management Accountant should carry out professional services in
accordance with the relevant technical and professional standards.
5.2 Types of Audit
E) Cost Audit :
b) Principles of Cost Audit:
6) Professional Competence and Due Care:
The cost and management accountant has to maintain professional knowledge and skill at
a level required to ensure that a client or employer receives the advantage of competent
professional service, based on up-to-date developments in practice, legislation and
techniques.
7) Confidentiality:
A cost and management accountant should respect the confidentiality of information
acquired during the course of performing professional services and should not use or
disclose any such information without proper and specific Commission or unless there is a
legal or professional right or duty to disclose.
8) Professional Behaviour:
A professional Cost and Management Accountant, being a member of the Institute of Cost
and Management Accountants of India, should act in a manner consistent with the good
reputation of the profession. He should meticulously avoid any such conduct or behaviour
as may cast an unfavourable aspersion on the profession.
9) Engagement in Other Occupation:
A professional cost accountant in public practice should not concurrently be engaged in
any business occupation and activity which might impair his integrity, objectivity or
independence or the good reputation of the profession.
5.2 Types of Audit
F) Management Audit :
It is the most modern technique of audit. It is a type of audit which involves examination
of plans, policies, procedures, methods and strategies of the organization with a view to
improve organizational effectiveness. It does not look into the past, present but also in
the future. Management audit is not a statutory audit. It is necessary to improve
profitability of the business.
a) Objectives of Management Audit:
Management audit aims at improving the efficiency of the management by identifying
areas of weakness in internal control system and suggest measures to improve the
performance. It is carried out to achieve the following objectives:
1) Appraise the managerial performance at all levels.
2) Enhance operational profitability.
3) Improve organizational efficiency.
4) Spotlight the decisions or activities, which are not in conformity with organizational
objectives.
5) Ascertain that organizational objectives are properly understood at all levels.
6) Discover weaknesses or irregularities in the internal control system and suggest
measures to get best possible results.
7) Evaluate plans and policies.
8) Review the company’s organizational structure, i.e., assignment of duties and
responsibilities and delegation of authority.
9) Facilitate performance evaluation of different resources.
5.2 Types of Audit
F) Management Audit :
b) Importance of Management Audit:

Helps in
Pays Minimizing
Attention To Cost of
Improvement Production
Suggests
Changes Factors

Suggests
Means to
Improve
Detects
Errors
and
Frauds
5.2 Types of Audit
F) Management Audit :
b) Importance of Management Audit:
1) Detects Errors and Frauds :
The management auditor is appointed by the management to detect the errors or frauds or
irregularities in any of the elements of the organization. He has to report to the management. It
is a continuous process.
2) Suggests Means to Improve :
The management auditor not only detects the errors and frauds but they also suggest ways and
means to prevent the commission of errors, frauds and manipulation of accounts.
3) Suggests Changes :
The management auditor aims at achieving the efficiency of the management. It suggests any
improvement in running the business can be made in order to maximize the profits or to
eliminate the wastes.
4) Pays Attention To Improvement Factors :
The management auditor plays an important role in this area by paying attention to all the
factors of production and to the elements of costs which are very important in the business
world of today.
5) Helps in Minimizing Cost of Production :
Due to keen competition in the business world today, the management of the industrial
organizations wants to minimize the cost of production which is possible by eliminating wastes,
avoid bottle-necks and to utilize fully the manpower as well as the plant and machinery and so
on.
5.2 Types of Audit
G) Financial Audit :
Financial auditing refers to an accounting process applied in business. The process
involves using an individual body for evaluating the financial transactions and
statements of a business. The ultimate purpose of financial audit is presenting an
accurate amount of the business transactions of a company. Besides, it ensures
that the accounts presented to the public and shareholders are accurate and
justified.

a) Objectives of Financial Audit:

Before commencing audit of a company, an auditor should understand the
objectives of audit. The objectives of an independent financial audit are:
1) To review of accounting data so as to express an independent opinion—
whether or not the financial statements exhibit “a true and fair view" of
the state of company’s affairs.
2) To detect of errors and frauds.
3) To prevent of re-occurrence of errors and frauds.
5.2 Types of Audit
G) Financial Audit :
b) Principles of Financial Audit:
5.2 Types of Audit
G) Financial Audit :
b) Principles of Financial Audit:
General principles Prerequisites for conducting financial audits are as follows:
1) Ethics and Independence
The financial auditor should comply with the relevant ethical requirements, including
those pertaining to independence, when carrying out audits of financial statements.
2) Quality Control:
The financial auditor should implement quality control procedures at the engagement
level that provide reasonable assurance that the audit complies with professional
standards and the applicable legal and regulatory requirements, and that the auditor’s
report is appropriate in the circumstances.
2) Engagement Team Management and Skills:
The financial auditor should be satisfied that the entire audit team, and any external
experts, collectively has the competence and capabilities to:
1) Carry out the audit in accordance with the relevant standards and the
applicable legal and regulatory requirements; and
2) Enable the auditor to issue a report that is appropriate in the circumstances.
4) Audit Risk:
The financial auditor should reduce audit risk to an acceptably low level in the
circumstances of the audit so as to obtain reasonable assurance as the basis for an
opinion expressed in a positive form.
5.2 Types of Audit
G) Financial Audit :
b) Principles of Financial Audit:
5) Professional Judgement and Professional Scepticism:
The financial auditor should plan and perform the audit with professional scepticism,
recognizing that circumstances may exist that causes the financial statements to be
materially misstated. When planning, performing, concluding and reporting an audit
of financial statements, the auditor should exercise professional judgement.
6) Materiality:
The financial auditor should apply the concept of materiality in an appropriate
manner when planning and performing the audit.
7) Communication:
The financial auditor should identify the appropriate contact person(s) within the
audited entity’s governance structure and communicate with them regarding the
planned scope and timing of the audit and any significant findings.
5.2 Types of Audit
G) Financial Audit :
c) Basic Procedures for a Financial Audit:
Generally, four key phases are outlined for financial audit process. These phases include
planning the audit, determining the working of internal control, testing significant assertions
about the data and evaluating compliance, and reporting the evaluations. These phases are
explained below for your reference:
1) Planning:
The process of financial audit begins with a plan that involves the method of collecting data to
form an opinion about the organization or company’s financial status. A way is planned to collect
a sample reflecting a point in time in the life of the company or organization.
2) Internal Controls:
The next step involves giving a look at the internal controls. The auditor demands info, looks
closely at the records, and watches financial procedures in action. Without these steps, the
auditor cannot give a statement about the financial status of the organization.
3) Testing:
Testing implies checking whether the internal controls are working or not. An auditor requests
more info, returns to the company for more inspections, and watches how financial procedures
are being performed.
4) Reporting:
The final step in financial audit involves giving a conclusion on how the company adheres to
accounting standards. The audit from a CPA gives the organization an unqualified approval, a
qualified approval, a disclaimer, or an adverse finding.
5.3 Audit Report:
The main objective of an independent financial audit is expression of an opinion
regarding the truthfulness and fairness of presentation of the financial statements.
This opinion is communicated to the members / owners through the medium of audit
report.
A) Meaning:
A report is a document through which an auditor expresses his opinion on the
financial statements and /or about its components or items examined. A report is a
formal statement usually made after an enquiry examination or review of specified
matters under report and includes the reporting auditor's opinion thereon.

B) Definition :
1) Joseph Lancester:
“Report is a statement of collected and considered facts, so as to give clear and
concise information to the persons who are not already in possession of the full
facts of the subject matter of the report”.
5.3 Audit Report:
D) Contents / Elements of Audit Report:
5.3 Audit Report:
D) Contents / Elements of Audit Report:
1) Title:
An appropriate title, such as “Auditor’s Report” helps the reader to identify the
auditor’s report and to distinguish it from reports that might be issued by others.

2) Addressee:
The auditor’s report should be appropriately addressed as required by the
circumstances of the engagement and local regulations. The report is usually
addressed to the shareholders.

3) Scope Paragraph:
The paragraph describing the scope of the audit should clearly identify the financial
statements that have been audited. This includes the name of the organization, the
date and period covered by the financial statements.

4) Opinion Paragraph:
The opinion paragraph of the auditor’s reports should clearly set forth the auditor’s
opinion on the presentation in the financial statements of the company’s state of
affairs
5.3 Audit Report:
D) Contents / Elements of Audit Report:
5) Signature:
The auditor’s report should be signed in the name of the audit firm, the personal
name of the auditor or both, as appropriate.

6) Auditor’s Address:
The auditor’s report should name a specific location, which is usually the city in
which the auditor maintains his office.

7) Date of Report:
The auditor’s report should be dated. This informs the reader that the auditor
considered the effect on the financial statement and on his report of events or
transactions about which he became aware that occurred up to that date.
https://www.infosys.com/investors/reports-
filings/quarterly-results/2020-
2021/q4/documents/q4-and-12m-fy21-
financial-results-auditorsreports.pdf