Accounting Information Systems

1. E-Commerce and E-Business Accounting Information Systems

2. Study Objectives • An introduction to e-commerce and e-business. • The history of the Internet. • The physical structure and standards of the Internet. • E-commerce and the benefits of e-commerce. • The privacy expectations in e-commerce. • E-business and the IT enablement. • E-business enabling examples. • Intranets and extranets to enable e-business. • Internal controls for the Internet, intranets, and extranets. • XML and XBRL as e-business tools. • The ethical issues in e-business and e-commerce.

3. Introduction to E-commerce and E-business • E-commerce - electronically enabled transactions between a business and its customers. • E-business - includes not only electronic trade with customers, but also • servicing customers and vendors, • trading information with customers and vendors, and • electronic recording and control of internal processes. SO 1 An introduction to e-commerce and e-business.

4. Introduction to E-commerce and E-business Exhibit 14-1 E-business and E-commerce The most common method of conducting e-commerce and e-business is to use the Internet to electronically exchange data. SO 1 An introduction to e-commerce and e-business.

5. Introduction to E-commerce and E-business Quick Review Which of the following statements is true? • a. E-business is a subset of e-commerce. • b. E-commerce is a subset of e-business. • c. E-business and e-commerce are exactly the same thing. • d. E-business and e-commerce are not elated. SO 1 An introduction to e-commerce and e-business.

6. The History of the Internet • In 1965, a computer at MIT (Massachusetts) was connected to a computer in California, using dial-up telephone lines. • In 1969, computers at four major universities were connected via leased telephone lines. • Grew into a network called ARPANET. • Purpose was to share military research data among UCLA, UC Santa Barbara (UCSB), Stanford, and the University of Utah. • Over time, many other universities, NASA, and the Rand Corporation were connected to this network. SO 2 The history of the Internet.

7. The History of the Internet • Two technologies developed for ARPANET: • Packet switching • Router • E-mail was adapted to ARPANET in 1972. • BBN Technologies, • developed the use of the @ symbol in e-mail address. • developed a communication protocol to use in ARPANET. • in the 1970s, helped develop the TCP/IP protocol. SO 2 The history of the Internet.

8. The History of the Internet • In 1986, the National Science Foundation (NSF) began to develop a backbone set of servers, gateways, and networks that eventually became the Internet. • Internet serves as backbone for World Wide Web. • In 1992, commercial enterprises began offering Internet access to subscribers. • In 1993, first graphical user interface (GUI) browser was developed. • In 1995, the NSF relinquished control of the Internet. Since that time, all Internet traffic has been routed through commercial networks. SO 2 The history of the Internet.

9. The History of the Internet Exhibit 14-2 Chart of the Number of Web Servers

10. The History of the Internet Quick Review An electronic hardware device that is located at the gateway between two or more networks is a • a. packet switch. • b. URL. • c. router. • d. protocol. SO 2 The history of the Internet.

11. The Physical Structure and Standards of the Internet The Network Types of organizations that make up the Internet. Exhibit 14-3 Architecture of the Internet SO 3 The physical structure and standards of the Internet.

12. The Physical Structure and Standards of the Internet The Network • The Internet comprises, • backbone providers, • network access points, • regional ISPs, • local ISPs, and • Internet subscribers. SO 3 The physical structure and standards of the Internet.

13. The Physical Structure and Standards of the Internet The Network • The Internet comprises, • backbone providers, • network access points, • regional ISPs, • local ISPs, and • Internet subscribers. SO 3 The physical structure and standards of the Internet.

14. The Physical Structure and Standards of the Internet The Network • The Internet comprises, • backbone providers, • network access points, • regional ISPs, • local ISPs, and • Internet subscribers. • dial-up modems, • digital subscriber lines (DSL), or • cable TV lines. SO 3 The physical structure and standards of the Internet.

15. The Physical Structure and Standards of the Internet Exhibit 14-4 A Simple Web Page and the HTML Source Code. The Common Standards of the Internet • HTML - language to present data on websites. SO 3 The physical structure and standards of the Internet.

16. The Physical Structure and Standards of the Internet Exhibit 14-4 A Simple Web Page and the HTML Source Code. The Common Standards of the Internet SO 3 The physical structure and standards of the Internet.

17. The Physical Structure and Standards of the Internet Exhibit 14-4 A Simple Web Page and the HTML Source Code. The Common Standards of the Internet • URL - uniform resource locater address. • Domain Name - http://www.google.com. • Common suffix portions of domain names: .com - commercial .edu - educational .org - nonprofit .gov - governmental .mil - military .net - network • URL system actually uses IP addresses. SO 3 The physical structure and standards of the Internet.

18. The Physical Structure and Standards of the Internet Quick Review The type of organization that serves as the main trunk line of the Internet is called a • a. local ISP. • b. regional ISP. • c. global ISP. • d. backbone provider. SO 3 The physical structure and standards of the Internet.

19. E-Commerce and its Benefits Benefits of E-commerce for the Customer • Access to broader market for goods and services. • More convenient times for shopping. • More choices to the customer. • Lower prices. • Exchange information with businesses before, during, and after the purchase. • Quicker delivery of the product. • Receive targeted marketing from businesses. SO 4 E-commerce and the benefits of e-commerce.

20. E-Commerce and its Benefits Disadvantages of E-commerce for Customer • Opportunity for fraud. • Theft of assets. • Theft of data. • Inability to handle or try out the product. SO 4 E-commerce and the benefits of e-commerce.

21. E-Commerce and its Benefits Benefits of E-commerce for the Business • Access to broader market. • Reduced marketing costs. • Potential for much richer marketing concepts. • Quickly react to changes in market conditions. • Likely to experience reduced order-processing and distribution costs. • Customer convenience likely to result in higher sales. • Higher sales with reduced marketing, order processing, and distribution costs can lead to higher profits. SO 4 E-commerce and the benefits of e-commerce.

22. E-Commerce and its Benefits Disadvantages of E-commerce for Business • IT system usually more complex and costly. • World Wide Web opens a business to: • chances for fraud, • hackers, and • compromised customer privacy. SO 4 E-commerce and the benefits of e-commerce.

23. E-Commerce and its Benefits E-Commerce and Traditional Commerce • Brick and mortar. • Etailers. • Clicks and mortar (bricks and clicks). SO 4 E-commerce and the benefits of e-commerce.

24. E-Commerce and its Benefits Quick Review Which of the following is not a direct advantage for the consumer from e-commerce? • a. Access to a broader market. • b. More shopping convenience. • c. Reduced order-processing cost. • d. Information sharing from the company. SO 4 E-commerce and the benefits of e-commerce.

25. E-Commerce and its Benefits Quick Review Each of the following represents an application of B2C commerce except • a. software sales. • b. electronic retailing. • c. data exchanges. • d. stock trading. SO 4 E-commerce and the benefits of e-commerce.

26. Privacy Expectations of Business in E-commerce • Personal information to be protected: • Name. • Address. • Social Security number or other ID number. • Employment history. • Personal or family health conditions. • Personal or family financial information. • History of purchases or other transactions. • Credit records. SO 5 The privacy expectations in e-commerce.

27. Privacy Expectations of Business in E-commerce • Ten privacy practices to ensure adequate customer confidence regarding privacy of information: • Management. • Notice. • Choice and consent. • Collection. • Use and retention. • Access. • Onward transfer and disclosure. • Security. • Quality. • Management and enforcement. SO 5 The privacy expectations in e-commerce.

28. Privacy Expectations of Business in E-commerce Quick Review Before forwarding customer data, an organization should receive explicit or implicit consent of the customer. This describes which of the AICPA Trust Services Principles online privacy practices? • a. Consent. • b. Use and retention. • c. Access. • d. Onward transfer and disclosure. SO 5 The privacy expectations in e-commerce.

29. E-Business and IT Enablement • The supply chainis the set of linked processes that take place from the, • acquisition and delivery of raw materials, • through the manufacturing, • distribution, • wholesale, and • delivery of the product to the customer. SO 6 E-business and the IT enablement.

30. E-Business and IT Enablement Exhibit 14-6 E-commerce B2C vs. E-Business B2B4 B2B—A Part of E-Business SO 6 E-business and the IT enablement.

31. E-Business and IT Enablement Quick Review Which of the following processes within a supply chain can benefit from IT enablement? • a. All processes throughout the supply chain. • b. Only internal processes within the supply chain. • c. Only external processes within the supply chain. • d. Exchange processes between a company and its suppliers. SO 6 E-business and the IT enablement.

32. E-Business and IT Enablement E-Business Enablement Examples SO 7 E-business enabling examples.

33. Intranets and Extranets to Enable E-Business Exhibit 14-7 Internet, Extranet, and Intranet Three levels of network platforms SO 8 Intranets and extranets to enable e-business.

34. Intranets and Extranets to Enable E-Business Quick Review Intranets are used for each of the following except • a. communication and collaboration. • b. business operations and managerial monitoring. • c. web publishing. • d. customer self-service. SO 8 Intranets and extranets to enable e-business.

35. Internal Controls for the Internet, Intranetsand Extranets Exhibit 14-8 Controls to Limit Access to Intranets and Extranets SO 9 Internal controls for the Internet, intranets, and extranets.

36. Internal Controls for the Internet, Intranetsand Extranets Exhibit 14-8 Controls to Limit Access to Intranets and Extranets SO 9 Internal controls for the Internet, intranets, and extranets.

37. Internal Controls for the Internet, Intranetsand Extranets Quick Review Which of the following IT controls would not be important in an extranet? • a. Encryption. • b. Password. • c. Antivirus software. • d. Penetration testing. • e. All of the above are important IT controls. SO 9 Internal controls for the Internet, intranets, and extranets.

38. XML and XBRL as Tools to Enable E-Business • Two languages as tools to enable e-business: • XML (eXtensible Markup Language) • XBRL (eXtensible Business Reporting Language) • XML In Internet EDI • Internet EDI is alternative to traditional EDI. • Uses the Internet to transmit business information between companies. • XML allows data exchange over Internet in a rich format. SO 10 XML and XBRL as e-business tools.

39. XML and XBRL as Tools to Enable E-Business Traditional EDI and VAN versus Internet EDI Exhibit 14-9 SO 10 XML and XBRL as e-business tools.

40. XML and XBRL as Tools to Enable E-Business XBRL for Financial Statement Reporting • Major advantages: • Easily used in several formats. • Printed in paper format. • Displayed as an HTML web page. • Sent electronically to the SEC. • Transmitted to banks or regulatory agencies. • Computer program can extract pieces of information from the XBRL file. SO 10 XML and XBRL as e-business tools.

41. XML and XBRL as Tools to Enable E-Business Quick Review An extensible markup language designed specifically for financial reporting is • a. Internet EDI. • b. XML. • c. XBRL. • d. XFRL. SO 10 XML and XBRL as e-business tools.