Controlling an EDI environment. (electronic data interchange)

Today, many firms use electronic data interchange, replacing paper business documents with digital messages directly exchanged and processed via computers. But do managers, systems personnel, and accountants understand how to control these systems?

To better grasp the issue, we organize EDI control objectives within a logical taxonomy and relate EDI control procedures directly to specific internal control objectives. We'll also describe the control procedures with sufficient detail to emphasize why the controls are needed and how they offer protection.

The world of business transactions being accomplished using paper documents is quickly coming to a close. In the near future, most businesses will use electronic data interchange (EDI) either voluntarily or they will be pressured to use it by firms with whom they do business (KPMG 1992b; Borthick and Roth 1993; AICPA 1995). The American Institute of Certified Public Accountants ranks EDI as the number one technology issue affecting businesses today (Accounting Today 1995).

It is clear that managers, systems designers and maintainers, and accountants of all types will have to understand how EDI systems operate. In addition, they will have to confront the unique control challenges that EDI environments present.

While books, technical manuals, and journal articles have addressed selected EDI control issues, these sources have not concisely demonstrated how EDI environments can be comprehensively controlled. This article will fill this salient void by presenting a taxonomy for EDI control objectives and by demonstrating how the objectives can be achieved using 31 internal control procedures. We will include a general description of the control objectives and the control procedures sufficient for the reader to see why the control procedures are needed and how they provide protection.

In addition, numerous references will permit the reader to efficiently obtain more detailed information, if desired. We hope this article will be of use to all business professionals who wish to supplement their basic understanding of EDI concepts with an effective approach to controlling EDI environments.

EDI Control Objectives