Auditing Electronic Commerce

(E-commerce) Industry

Prepared by:
Jennifer Bio
Shenjie Mhar Bogñalbal
E-commerce(or electronic commerce) is the buying and selling of
goods ( or service) on the internet. It encompasses a wide variety of data,
system, and tools for online buyers and sellers, including mobile
shopping and online payment encryption. Most businesses with an
ecommerce presence use an ecommerce store and/or an ecommerce
platform to conduct online marketing and sales activities and to oversee
logistic and fulfillment.

Types of e-commerce
1. Business to Consumer (B2C)
2. Business to Business (B2B)
3. Direct to Consumer (D2C)
4. Consumer to Consumer (C2C)
5. Consumer to Business (C2B)
Here are some example of types of e-commerce
• Retail
• Drop shipping
• Digital products
• Wholesale
• Services
• Subscription
• Crowd funding

Benefits of e-commerce
• Convenience
• Personalization and customer experience
• Global marketplace
• Minimized expenses
Disadvantages of e-commerce;
1. Limited costumer service.
2. Lack of instant gratification
3. Inability to touch product

14 Ecommerce Trends Leading the Way

1. Augmented Reality enhances the reality of online shopping
2. There will be a growing volume of voice search.
3. Al help shop learn about shoppers.
4. On-site personalization uses those insights to create
individualized experiences.
5. Big data plays a big part in creating personalized experience.
6. Chat bots improve the shopping experience.
7. Mobile shopping is still on the move.
8. More ways to pay.
9. Headless and API-driven ecommerce allow continued innovation.
10. Customers respond to video.
11. Subscriptions keep customer coming back.
12. Sustainability is becoming more important.
13. Businesses should optimize digital strategy for conversion.
14. B2B is growing and changing.
E-Commerce Intellectual Property Rights

 The Philippines has passed adequate legislation to promote eCommerce, the

eCommerce Law, Cybercrime, and Data Privacy Laws. However, enforcement
agencies like the Department of Justice and Philippine National Police and the
local courts are not yet adept at handling cases involving electronic
transactions. The system is not, however, in place. The National Privacy
Commission (NPC) is tasked with implementing the Data Privacy Law, and
they have had significant achievement through Philippine-based companies
designating “Data Privacy Officers” or DPOs. The NPC is also leading the
Philippines to be compliant with international privacy agreements such as the
European General Data Protection Regulation (GDPR) and APEC Cross Border
Privacy Rules (CBPR).

Popular eCommerce Sites:

www.b2bpricenow.com
https://e-order.asiarx.com
http://philipines.tradekey.com
www.philippinescompanies.com
http://philipines.tradeford.com
http://www.kenresearch.com
https://www.carousell.ph/
 Challenges of ecommerce in the Philippines
• Cash- based payment methods dominate, for now
• Logistic concerns due to unique geography
• Growing pains with internet connectivity
• Changing ecommerce perceptions

Audit considerations
E-commerce, or e-business, via the internet is now bringing fundamental changes to the
way business is conducted. The continued evolution of technology, the economics of the
internet, and the growth of e-commerce are significantly affecting the traditional
business environment. E-commerce is changing the competitive market and making
international trading viable for a much larger number of businesses.

However, during these changes in the business environment, the auditor's responsibility to
provide an opinion on the financial report has remained unchanged. Although
communication and transactions over networks and through computers are not new
features of the business environment, the increasing use of the internet for e-commerce
introduces new variables of risk and control requiring audit consideration. E-commerce is
not clearly defined or constrained but comes with 'open boundaries' in terms of scope. The
auditor requires appropriate skills to understand how an entity's e-commerce strategy
addresses the business risks that arise. Audit risk assessment for e-commerce requires a
paradigm shift in the way auditors consider client entities and the way auditors plan
audit procedures to reduce audit risk to an acceptable level.
 
When a business engages in e-commerce, it runs many new risks. The internet provides every
entity with the opportunity to trade in a global market. But when transactions are initiated by
unknown parties on the internet, there are risks relating to the authenticity and integrity of
trading partners and e-commerce transactions. Usually, management will identify e-
commerce business risks, and address those risks with appropriate security and control
measures. In contrast, the auditor will consider e-commerce business risks only in so far as
they affect audit risk. Audit risk relates to the risk that the entity's financial report (on which
the auditor provides an audit report) is materially misstated.
 
A business may be faced with a number of constraints when developing e-commerce,
including the availability of appropriate technical and marketing expertise, the need for
continuing investment, and the identification and resolution of security issues.
Although these issues may remain unresolved, many entities are continuing to develop e-
commerce on a 'risk-reward' basis. As a result, the e-commerce market is growing rapidly,
particularly the use of e-commerce on a business-to-business (B2B) basis to shorten
supply lines and reduce costs. Such growth, without due attention to the risks in an electronic
trading environment, impacts on both business risk and audit risk
E-commerce business risks include those arising
from:
1. the identity and nature of relationships with e-commerce
trading partners;
2. the integrity of transactions;
3. electronic processing of transactions;
4. systems' reliability
5. privacy issues;
6. return of goods and product warranties;
7. taxation and regulatory issues.

Key Risks Areas in E- Commerce Industry

• Supply Chain management
• Sales and marketing Strategy
• Vendor Management
• Information Technology
• Claim, Return, and Refund
• Revenue Assurance
 
Thank you!