Report accounting information system e commerce business and accounting problems in e commerce

UNIVERSITY OF ECONOMICS AND LAW Faculty of Information Systems REPORT ACCOUNTING INFORMATION SYSTEM Topic: E-Commerce Business and Accounting problems in E-commerce Lecturer: MSc Vũ Văn Điệp Group members: Đinh Hoàng Duy K194060844 Phan Kỳ Khánh Chiêu K194060843 Phan Quang Minh Long K194060852 Nguyễn Hà Thy K194060876 Nguyễn Ngọc Phương Uyên K194060879 Ho Chi Minh City, August, 2022 Table of Contents Overview E-commerce and Accounting Information System (AIS) 1.1 E-commerce 1.1.1 Definition 1.1.2 Types of E-commerce 1.1.3 The benefit of E-commerce 1.1.4 E-commerce in Vietnam 1.2 Accounting Information System (AIS) 1.2.1 What is an AIS? 1.2.2 How can an AIS add value to an organization? 1.3 Accounting information system in e-commerce enterprises Problems with accounting information systems at enterprises 2.1 Problems related to information security 2.1.1 Confidentiality of customer information 2.1.2 Security of information systems in enterprises 2.2 Risk of external intrusion and viruses transmitted through the network 2.3 Risks in the process of managing business information 2.3.1 Providing inaccurate information 2.3.2 Inaccurate inventory information 2.3.3 Risks in the process of changing orders after placing orders 2.4 Risks in payment 2.5 Revenue recognition problem 10 2.6 Ensuring the effectiveness and reasonableness of accounting information in ecommerce 10 Solution 11 3.1 Information security 3.1.1 11 Security of customer information 11 3.1.2 Security the information system, prevent fraudulent actions when accessing the information system 12 3.1.3 Develop measures to prevent outside intrusions and viruses transmitted through the network 12 3.2 Ensure that electronic systems for transmitting, receiving, and processing customer order information operate efficiently and provide accurate information 12 3.3 Inaccurate inventory information 13 3.4 Change order after placing an order 13 3.5 Risk in payment 13 3.6 Revenue recognition problem 13 3.7 Ensuring the effectiveness and reasonableness of accounting information in ecommerce 14 REFERENCES 15 Overview E-commerce and Accounting Information System (AIS) 1.1 E-commerce 1.1.1 Definition Ecommerce, also known as electronic commerce or internet commerce, refers to the buying and selling of goods or services using the internet, the transfer of money and data to execute these transactions E-commerce is based on some technologies such as electronic money transfers, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), management systems inventory, and automated data collection systems Simply defined, e-commerce is transactions conducted on the Internet between businesses and customers buying and using goods and services, or between businesses 1.1.2 Types of E-commerce Classifying e-commerce according to the objects involved in the transaction, there are many different e-commerce models in the world today Here are some e-commerce models that have been developing ● Business-to-Consumer (B2C): Is an e-commerce model between businesses and consumers The most common application of this model is shopping for goods and services, managing personal finances ● Business-to-Business (B2B): Businesses will conduct the exchange of goods, services and information with each other via fax and the internet The main form of B2B e-commerce model is sales and business support for businesses directly online; procurement of raw materials for the production process from suppliers or through auctions; or a news site that provides information about a business product ● Consumer-to-Consumer (C2C): Is a model of e-commerce between consumers This model allows consumers to trade directly with each other 1.1.3 The benefit of E-commerce • Market expansion: The market in e-commerce is a global market without borders Thanks to the internet connection, organizations can quickly access all markets, large and small, across the globe • Cost reduction: One of the biggest advantages of ecommerce to businesses that keep sellers interested in online selling is cost reduction Many sellers have to pay lots to maintain their physical store In many cases, even after investing in services, stock, maintenance and workforce, sellers don’t receive desired profits and ROI • Affordable advertising and marketing: Sellers don’t have to spend a lot of money to promote their items The world of ecommerce has several affordable, quick ways to market online Ecommerce marketplaces are visual channels – and sellers can really show off their product • Several payment modes: help consumers and businesses reduce significantly transaction time and cost • Helping businesses understand information about the market and partners • Quickly and effectively reach the target customer market, thus meeting all customer needs in the best way • Facilitating the establishment and strengthening of relationships between the actors involved in the trade process 1.1.4 E-commerce in Vietnam Many enterprises have organized the deployment of e-commerce applications at various scales and levels from equipping computers, connecting to the Internet in different forms, exploiting basic applications of e-commerce such as electronic mail, using software for production, business, A part of Vietnamese consumers in big cities are quite familiar with buying a variety of goods and services through e-commerce websites such as airline tickets, electronics, mobile phones, computers, books, tours, hotel rooms More and more families are connected to the Internet and the number of mobile subscribers increases, making the deployment of e-commerce applications to all consumer segments in society more favorable 1.2 Accounting Information System (AIS) 1.2.1 What is an AIS? Accounting Information System (AIS) is a system that collects, records, stores, and processes data to produce information for decision makers An AIS can be a very simple paper-and-pencil-based manual system, a very complex system using the very latest in computers and information technology, or somewhere between these two extremes Regardless of the approach taken, the process is the same The AIS and the people who use it must still collect, enter, process, store, and report data and information The paper and pencil or the computer hardware and software are merely the tools used to produce the information There are six components of an AIS: ● The people who operate the system and perform various functions ● The procedures and instructions, both manual and automated, involved in collecting, processing, and storing data about the organization's activities ● The data about the organization and its business processes ● The software used to process the organization's data ● The information technology infrastructure, including computers, peripheral devices, and network communications devices used to collect, store, process, and transmit data and information ● The internal controls and security measures that safeguard the data and the AIS The functions of an AIS are to: • Collect and store data about events, resources, and agents • Transform that data into information that management can use to make decisions about events, resources, and agents • Provide adequate controls to ensure that the entity’s resources (including data) are: o Available when needed o Accurate and reliable 1.2.2 How can an AIS add value to an organization? As a support activity, the AIS adds value by providing accurate and timely information so the five primary value chain activities can be performed more effectively and efficiently Well-designed AIS can this by: ● Improve the quality and reducing the costs of products or services: For example, an AIS can monitor machinery so operators are notified immediately when performance falls outside acceptable quality limits This helps maintain product quality It also reduces the amount of wasted materials and the costs of having to rework anything ● Improving efficiency: A well-designed AIS can make operations more efficient by providing more timely information For example, a just-in-time manufacturing approach requires constant, accurate, up-to-date information about raw materials inventories and their locations ● Sharing knowledge: A well-designed AIS can make it easier to share knowledge and expertise, perhaps thereby improving operations and even providing a competitive advantage ● Improving the efficiency and effectiveness of its supply chain: For example, allowing customers to directly access the company's inventory and sales order entry systems can reduce the costs of sales and marketing activities Moreover, if such access reducing the customers' costs and time of ordering, both sales and customer retention rates may increase ● Improving the internal control structure: Security, control, and privacy are important issues in today's world An AIS with the proper internal control structure can protect systems from problems such as fraud, errors, equipment and software failures, and natural and political disasters ● Improving decision making: An AIS can improve decision making by providing accurate information in a timely manner 1.3 Accounting information system in e-commerce enterprises he information system in an e-commerce enterprise is automatic and the linkage between other information systems within the enterprise is very high In the environment of an e-business, electronic transactions will automatically connect to systems after online transactions are made, such as internal reporting system, inventory management system, etc audit system, … Due to its high degree of automation, in order for the financial accounting information to reflect properly, the system needs to ensure that all transactions entered into the information processing system need to be recognized and recorded correctly separate and complete In addition, automatic information processing needs to ensure that recorded transactions are reflected correctly For programs that automatically enter data, data changes also need to be saved To monitor and control the recording and modification of data in the information processing software system to ensure that information is processed correctly and without errors To ensure the accuracy of the accounting information system before accepting a transaction for processing, the system needs to be designed to check the accuracy of business information and the connection of information between systems consistent with each other For an e-commerce enterprise, the application of information technology and its information infrastructure is considered as an integral part of the information system Because the electronic business process has a direct effect on the accounting system, and therefore, on the effectiveness of any information or data provided by that system Therefore, the issue of security and safety is always taken into account when designing information processing systems in e-commerce enterprises and there must be a process for implementing risk management of information systems in enterprises Problems with accounting information systems at enterprises 2.1 Problems related to information security 2.1.1 Confidentiality of customer information Any customer who wants to order online through the company's website must register for a personal account and declare personal information such as full name, address, phone, email, etc For online payment, customers also need to provide information related to their bank account This customer account is used in identifying customers, making statistics of purchases and having preferential policies for loyal customers or customers who buy in large quantities This information is very personal, so if it is disclosed, it will cause many dangers for both customers and the company Aware of the importance of this confidentiality, the company has committed to customers that will keep the information that customers have declared when registering for an account Therefore, the company always faces the risk of this information being leaked out 2.1.2 Security of information systems in enterprises In e-commerce business, placing and processing orders mainly relies on information system application, so it is necessary to ensure that the system correctly processes orders To be accurate, information systems are designed to prevent objects inside the enterprise from accessing and having behaviors that falsify the information system The application of information technology in automatic processing creates the possibility that the company's employees or outside objects can gain unauthorized access to the system to edit data about orders, or payment orders to misappropriate assets and cause losses to the company 2.2 Risk of external intrusion and viruses transmitted through the network Along with the development of information technology, the ability of hackers and destructive programs (viruses) also grows and becomes more dangerous If the information system is paralyzed or compromised, it will lead to extremely dangerous consequences for the company's business This can lead to loss of assets and business information of the company Sometimes the business will be delayed due to the website being crippled if vandalized, it may cause trouble to customers, discrediting the company's business 2.3 Risks in the process of managing business information 2.3.1 Providing inaccurate information An effective and accurate information system needs to be regularly and accurately updated with relevant information (for example, selling price, inventory, information on discounts, promotions, etc., shown on the website needs to be accurate with the company's current sales policy) Providing inaccurate information to customers causes terrible damage to the company, in particular, will seriously affect revenue recognition 2.3.2 Inaccurate inventory information Failure to accurately track inventory can pose a risk that inventory may not be sufficient to supply orders received when the company has no intention of re-stocking or incoming goods may not be able to meet demand This leads to the risk that the customer will have to wait longer to receive the goods or the order will be canceled Obviously, the above cases will cause losses to the company not only in terms of refund costs for canceled orders, but also the company will lose credibility and trust in customers when they are not satisfied with the service that the company provides when there is a long wait for the order or the order is canceled after placing the order and payment 2.3.3 Risks in the process of changing orders after placing orders During the purchase process, the customer may change the order after placing the order To that, customers need to contact the company's sales staff directly and it can be difficult and time consuming to change orders On the other hand, if the number of orders changes too much, the staff may make mistakes or forget to process the order Therefore, this may cause confusion in customer delivery and revenue recognition in the accounting information system 2.4 Risks in payment ● Payment in cash: When customers choose to pay in cash, it means that they will pay the goods directly to the delivery staff Thus, there is a risk that the customer does not receive the goods and does not pay or the customer has already paid the delivery staff but the employee may not return it to the company ● Paying through bank: The company's acceptance of online payments creates favorable conditions for customers in purchasing and paying, but it also poses a potential risk to the security of customers' payment information In addition, if customers transfer money to the company's account, after the transfer is complete, they must notify by email to the company's staff so that these people can check and confirm the order has been paid to ship the goods to the customer In case when an employee misses an email or mistakenly assigns payment to another order, the order will not be delivered to the customer or will deliver the wrong unpaid order All of the above problems cause risks and inconveniences not only for the company but also for the customers 2.5 Revenue recognition problem Revenue must be recognized in accordance with Vietnamese accounting standards This means that it will be automatically recognized when the order has been delivered to the customer and paid in full However, there are many enterprises recognize revenue when goods are just released from the warehouse, leading to lost or damaged orders that customers not receive but the revenue is still recognized There is a risk that if there is a mistake in not recording these defective orders and then other goods are sent out and sent back to the customer to replace the old goods, the revenue will be recognized again 2.6 Ensuring the effectiveness and reasonableness of accounting information in e-commerce In the e-commerce environment, risks may arise from the use of information technology in processing accounting information The risks may be the ambiguity of the data, the 10 inconsistency in the transfer and identification of the data at each stage of the accounting process Solution 3.1 Information security E-commerce brings many benefits to consumers but also poses many risks, especially regarding customers' private information Therefore, information security becomes one of the important contents of e-commerce activities in the current digital economy and is the key secret to the success of this type of commerce However, in our country, at present, this issue has not received adequate attention 3.1.1 Security of customer information Building a secure internal information security system is an effective defense shield for the entire business operation against today's increasingly sophisticated cyber attack threats ● Build a secure intranet system by setting up programs and software that support high-security features Each business should have a leader or a specialized individual, knowledgeable about the security and privacy of the enterprise's data, and responsible for monitoring the implementation of security measures and processes to ensure data security This will help reduce cybersecurity risks to businesses and their data ● Security settings for all devices at the enterprise and employees Set out configuration standards for each device before being put into use These standards can be policies about passwords, accounts, services or system configuration, etc ● Implement measures to train and raise awareness of employees in the agency about data security in the enterprise ● Develop scripts and documents on the response process when security incidents occur to the data system and customer information of the enterprise 11 3.1.2 Security the information system, prevent fraudulent actions when accessing the information system With e-commerce businesses, security must be enhanced Enterprises should decentralize website administration in accessing and editing data within the business according to the role of each employee It is necessary to have appropriate decentralization to prevent unauthorized access to the system It would be very dangerous if every employee had full control over the website of the enterprise In addition, it is necessary to set up an alert when any foreign IP tries to access the website of the business The editing of data should be designed to leave an audit trail to facilitate regular independent inspection and control 3.1.3 Develop measures to prevent outside intrusions and viruses transmitted through the network The ability to identify and manage cybersecurity risks promptly is critical to the success and survival of any organization A safe, sustainable cyber-security posture relies on continuous risk management, including continuous monitoring and data collection Enterprises should enable firewalls to prevent viruses; update software and operating systems; install copyrighted anti-malware software; encrypt and back up data regularly, and periodically Anti-malware software is a program that helps detect, remove and prevent malicious code from infecting computers and networks Because malicious code is a general term, including viruses, worms, trojans, etc., anti-malware software will help businesses prevent many threats from hackers 3.2 Ensure that electronic systems for transmitting, receiving, and processing customer order information operate efficiently and provide accurate information The process of updating information on the system needs to be done promptly as soon as there is a change and there needs to be an independent check and control for accuracy so that no errors occur during the update process In addition, the system also needs to be checked regularly to make sure that there are no system failures while in operation The order must be processed correctly for the 12 goods information, the order number, the item, the quantity, and the shipping cost must be calculated following the location of the goods 3.3 Inaccurate inventory information There are many ways to support inventory management, but the best way is to use a centralized inventory management platform The process of warehouse import, export, and warehouse transfer is strictly controlled and kept in detail Based on the data on remaining goods in stock, you will promptly replenish products that are about to be out of stock so that the sales process is not interrupted and customers not leave when the store runs out of products Currently, on the market, there are many inventory management software such as KiotViet, Sapo POS, Ecount, SalesBinder, etc 3.4 Change order after placing an order Enterprises should add a support function that allows for editing and updating orders automatically in every state of the order This function will help the company accurately track order information, and limit manual handling by employees, thus reducing unnecessary errors caused by human factors and convenient for customers when customizing the order as desired 3.5 Risk in payment ● Cash payment: It is necessary to have a policy to check against the goods delivered to these employees for delivery and the amount collected to avoid the risk of money being misappropriated by employees Customers ordering large orders may require prepayment for the order ● Transfer payments: It is necessary to strictly manage payment information, minimizing errors 3.6 Revenue recognition problem To be able to recognize revenue promptly, the company needs to track and confirm orders quickly Enterprises should record revenue according to accounting standards to ensure that it accurately reflects economic transactions arising in the course of business operations 13 In addition, it is necessary to exclude defective orders through confirmation with delivery staff and customers for timely updates, handling of such defective orders, and reasonable revenue recognition Using manage cash flow systems integrating sales software, accounting software, financial information, etc to limit the risk of electronic payment for businesses 3.7 Ensuring the effectiveness and reasonableness of accounting information in e-commerce Accounting information needs to be effective for decision-making purposes, the effectiveness of accounting information requires analysis, availability, confidentiality, accuracy, reliability, and cannot be copied illegally The analysis is a prerequisite of information content that accountants provide to make decisions This requirement is satisfied when the data is correct, the information system is complete and compatible with all the requirements for non-modification and information theft The effectiveness of information processing, data, and computing applications are used under specific configuration conditions, and can only be modified with approval The need to use accounting information to make timely decisions requires this information to be available for use at all times Under this requirement, enterprises must ensure the availability of hardware and software, and information data for normal business operations, especially for system assurance issues in the event of information interruption for a reasonable period Therefore, it is necessary to establish an appropriate response process for urgent problems (data loss, transmission failure ) In addition, the ability to convert digital information to readable information in accounting books is also essential Reliability and accuracy of information related to the origin of economic transactions for individuals, who perform such transactions When data or information is exchanged in an electronic/digital manner, the other party must be identifiable, for example using a digital signature process 14 REFERENCES Fontinelle, A (2022, March 19) Introduction to Accounting Information Systems – AIS Investopedia Retrieved August 1, 2022, from https://www.investopedia.com/articles/professionaleducation/11/accountinginformation-systems.asp Manda, G (2021, November 20) The Benefits of Accounting Information Systems Bizfluent Retrieved August 1, 2022, from https://bizfluent.com/list6588708-benefits-accounting-information-systems.html Maplesden, P (2022, February 16) Biggest Challenges of Ecommerce Accounting to Overcome Fast Incfile Retrieved August 1, 2022, from https://www.incfile.com/blog/biggest-challenges-of-ecommerce-accounting Nguyen, M (2022, April 1) E-commerce in Vietnam - statistics & facts Statista Retrieved August 1, 2022, from https://www.statista.com/topics/5321/ecommerce-in-vietnam Aham-adi, M (2021, March) Comprehensive Guide to Ecommerce Accounting Ccbill https://ccbill.com/blog/ecommerce-accounting 15 ... different e- commerce models in the world today Here are some e- commerce models that have been developing ● Business- to-Consumer (B2C): Is an e- commerce model between businesses and consumers The... enterprises he information system in an e- commerce enterprise is automatic and the linkage between other information systems within the enterprise is very high In the environment of an e- business, ... Revenue recognition problem 13 3.7 Ensuring the effectiveness and reasonableness of accounting information in ecommerce 14 REFERENCES 15 Overview E- commerce and Accounting Information System (AIS)