Internal Audit of Internet-Based Electronic Commerce Transactions: A TQM Approach

Abstract

The introduction of Internet-based electronic commerce (EC) has brought new risks to internal controls. Increased interdependencies among various parties in an EC transaction shifting organizational focus from an audit-risk to a business-risk exposure. This chapter addresses the nature of EC transactions and control considerations associated with them. The chapter also provides internal auditors with a Total Quality Management (TQM) framework for services performed within EC environment. The framework is developed and based on five principles: activity analysis, control analysis, evaluation analysis, risk assessment, and continuous improvement. This approach provides appropriate continuous monitoring of business practices and internal controls to ensure audit effectiveness and efficiency.