RISKS AND CONTROLS IN E-BUSINESS AND EDI (STUDY OBJECTIVE 8, continued)
Exhibit 8-19 in Chapter 8 summarized the risks and controls from the seller's perspective. That exhibit is presented here as Exhibit 9-20 to summarize risks and controls of electronic purchase transactions from the buyer's perspective, including security and confidentiality risks, processing integrity risks, and availability risks.
Exhibit 9-20 E-Business and EDI Risks and Controls
SECURITY AND CONFIDENTIALITY
When conducting purchase and payment transactions electronically, there must be an electronic link between buyer and seller IT systems. This electronic link might be in the form of private leased lines, third-party networks, or the Internet. No matter which type of electronic link is employed, the use of electronic links between buyer and seller exposes risks of unauthorized access and hacking or other network break-ins. Therefore, it is important that all users, including trading partners such as vendors, be authenticated when they access the system or records. The use of user IDs, passwords, and authority tables are intended to limit access to authorized users and to limit authorized users to only those files or records they must access to perform their assigned duties. Computer logs help management monitor user access and to discover unauthorized access and any resulting security breaches. Firewalls and encryption of data can limit unauthorized access by hackers or other outsiders.
Vulnerability testing and penetration testing allow the company to regularly test the vulnerability of the network connections used for e-business or EDI. Vulnerability testing is examining the system to determine the adequacy of security measures and to identify security deficiencies. Penetration testing is intentionally attempting to circumvent IT system access controls to determine whether there are weaknesses in any controls. This testing can help uncover vulnerabilities so that these problems can be fixed before they are exploited by outsiders or hackers. Intrusion detection software alerts the organization to hacking or other unauthorized use of the system or network.
Strong authentication controls that validate users and computer logs that record transactions can also help prevent repudiation of transactions by the seller. For example, a seller could claim that the electronic payment for a purchase was not received. Authentication of users and computer logs allow the organization to maintain an electronic audit trail that confirms that the electronic check was sent to the valid and authorized vendor and can help avoid repudiation of this payment transaction.
PROCESSING INTEGRITY
In e-business or EDI purchase transactions, vendors may be accessing files and records on the buyer's computer system and may be entering or transmitting data. Therefore, there are risks that the vendor's IT system can introduce erroneous or incomplete data. Data entered or transmitted by the vendor should be subject to input validation controls to ensure the accuracy and completeness of the data. These input validation checks include field checks, validity checks, limit checks, and reasonableness checks. In addition, the data entered into EDI translation software, or e-business Web forms must be integrated into the backoffice systems such as the receiving and accounts payable systems. These same input validation checks can assist in reducing errors as data are integrated into other systems within the organization. Finally, computer logs of all transactions conducted with sellers can serve as part of the audit trail to help trace or re-create transactions.
AVAILABILITY
Interruptions to the system can cause critical problems for companies that purchase and pay electronically. System slowdowns or failures can cause the company to be unable to purchase or pay as needed, which can cause the flow of products to be interrupted and thereby slow or stop manufacturing or sales. Anytime the Web systems or EDI connections are unavailable, there may be resulting interruptions in manufacturing and thus a possible failure to have products available to sell. Therefore, the company should put controls in place that minimize service disruptions, such as redundant systems, disaster recovery plans, testing of software changes, and capacity planning and testing.
Redundancy is needed for servers, data, and networks. A redundant server system requires maintaining one or more computers as extra, backup Web servers that can operate as the server if the main server goes down. Redundant data as a control is usually accomplished by having data stored in redundant array of inexpensive disks (RAID). A RAID storage maintains one or more disk drives that mirror each other. In this manner, one or more exact duplicates of the data are maintained. A backup network structure should be in place if communication is lost through the regular network.
Disaster recovery plans must be in place to ensure uninterrupted access to EDI or e-business processing even through natural disasters such as fire, flood, or earthquake. The company must have plans to continue service when disasters occur.
As changes are made to the purchasing website or the underlying software to process e-business or EDI purchases, it is important that the changes be tested before they are implemented. If such changes are not tested, they may fail and disrupt operations.
Managers must properly plan for sufficient capacity in the e-business or EDI system and servers to ensure that the system is not overwhelmed by the number of users accessing it or the number of transactions conducted. Managers should ensure that there are regular steps to monitor, test, and adjust the capacity of the system to meet its needs.
Controls that prevent or detect viruses or system intrusion must be in place. These controls are necessary because hackers, intruders, or viruses can slow or interrupt system operations. Intrusion detection and vulnerability testing can help prevent or detect possible intrusions.