Accounting information systems controls and process 2nd tunnwe weickgenannt chapter 14

SECOND EDITION

Chapter
14-1

Prepared
by Coby
Harmon
Prepared
by Coby
Harmon
UniversityofofCalifornia,
California, Santa
Santa Barbara
University
Barbara
Westmont
College College
Westmont


E-Commerce and
E-Business

Chapter
14-2


Study
Study Objectives
Objectives

1.

An introduction to e-commerce and e-business

2.

The history of the Internet

3.

The physical structure and standards of the Internet

4.

E-commerce and its benefits

5.

The privacy expectations in e-commerce

6.

E-business and the IT enablement

7.

E-business enablement examples

8.

Intranets and extranets to enable e-business

9.

Internal controls for the Internet, intranets, and extranets

10.

XML and XBRL as e-business tools

11.

The ethical issues in e-business and e-commerce

Chapter
14-3


Real
Real World
World

A few years ago, Wal-Mart affected a huge
change in the EDI (Electronic Data Interchange) approach to business-tobusiness transactions. Although EDI had been around for many years, the
technology had advanced to allow it to be conducted for free over the
Internet. Yet many were concerned about the lack of secure transmission
over the Internet. By 2002, Wal-Mart felt the new security standards, called
AS2, were adequate. It announced to its 10,000 small and mid-size suppliers
that the suppliers had one year to begin using Internet EDI (EDIINT AS2).
This was a tremendous change from its traditional EDI and value-added

networks, and it had a dramatic impact not only on Wal-Mart’s suppliers but
on many other large companies and their suppliers worldwide. Some call
Wal-Mart the market maker for Internet EDI. Its change to EDIINT led to a
revolution of adoption of Internet EDI around the world. Since the buyer and
seller have to use the same EDIINT AS2 protocol, Wal-Mart forced a huge
number of companies to switch to EDIINT, and in turn, those suppliers used
EDIINT with other business customers.

Chapter
14-4


Introduction
Introduction to
to E-commerce
E-commerce and
and
E-business
E-business
E-commerce - electronically enabled transactions between
a business and its customers.
E-business - includes not only electronic trade with
customers, but also

Chapter
14-5

►

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.


Introduction
Introduction to
to E-commerce
E-commerce and
and
E-business
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.
Chapter
14-6

SO 1 An introduction to e-commerce and e-business.

Introduction
Introduction to
to E-commerce
E-commerce and
and
E-business
E-business
Concept Check
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 related.

Chapter
14-7

SO 1 An introduction to e-commerce and e-business.

The
The History
History of
of the
the Internet
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.

Chapter
14-8

►

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.


The
The History
History of
of the
the Internet
Internet
 Two technologies developed for ARPANET:
►

Packet switching

►

Router

 E-mail was adapted to ARPANET in 1972.
 BBN Technologies,

Chapter
14-9

►

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.


The
The History
History of
of the
the Internet
Internet

Chapter
14-10



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.


The
The History
History of
of the
the Internet
Internet

Exhibit 14-2
Chart of the Number
of Web Servers

Chapter
14-11


The
The History
History of
of the
the Internet
Internet
Concept Check
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.

Chapter
14-12

SO 2 The history of the Internet.


The
The Physical
Physical Structure
Structure and
and Standards
Standards of

of
the
the Internet
Internet
The Network

Types of
organizations
that make up
the Internet.

Exhibit 14-3
Architecture of the
Internet
Chapter
14-13

SO 3 The physical structure and standards of the Internet.


The
The Physical
Physical Structure
Structure and
and Standards
Standards of
of
the
the Internet
Internet

The Network
The Internet comprises,

Chapter
14-14

►

backbone providers,

►

network access points,

►

regional ISPs,

►

local ISPs, and

►

Internet subscribers.

SO 3 The physical structure and standards of the Internet.


The

The Physical
Physical Structure
Structure and
and Standards
Standards of
of
the
the Internet
Internet
The Common Standards of the Internet
► HTML - language to present data on websites.
Exhibit 14-4
A Simple Web Page and
the HTML Source Code

Chapter
14-15

SO 3 The physical structure and standards of the Internet.


The
The Physical
Physical Structure
Structure and
and Standards
Standards of
of
the
the Internet

Internet
The Common Standards of the Internet

Exhibit 14-4
A Simple Web Page and
the HTML Source Code

Chapter
14-16

SO 3 The physical structure and standards of the Internet.


The
The Physical
Physical Structure
Structure and
and Standards
Standards of
of
the
the Internet
Internet
The Common Standards of the Internet
► URL - uniform resource locater address.
► Domain Name - .

Exhibit 14-4
A Simple Web Page and
the HTML Source Code

► Common suffix portions of domain names:

.com - commercial
.edu - educational
.org - nonprofit

.gov - governmental
.mil - military
.net - network

► URL system actually uses IP addresses.
Chapter
14-17

SO 3 The physical structure and standards of the Internet.


The
The Physical
Physical Structure
Structure and
and Standards
Standards of
of
the
the Internet
Internet
Concept Check
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.

Chapter
14-18

SO 3 The physical structure and standards of the Internet.


E-Commerce
E-Commerce and
and its
its Benefits
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.
Chapter
14-19

SO 4 E-commerce and its benefits.


E-Commerce
E-Commerce and
and its
its Benefits
Benefits
Disadvantages of E-commerce for the Customer
►Opportunity for fraud.
►Theft of assets.
►Theft of data.
►Inability to handle or try out the product.

Chapter
14-20

SO 4 E-commerce and its benefits.


E-Commerce
E-Commerce and

and its
its Benefits
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.
Chapter
14-21

SO 4 E-commerce and its benefits.


E-Commerce
E-Commerce and
and its
its Benefits
Benefits
Disadvantages of E-commerce for the Business
►IT system usually more complex and costly.
►World Wide Web opens a business to:

 chances for fraud,
 hackers, and
 compromised customer privacy.

Chapter
14-22

SO 4 E-commerce and its benefits.


E-Commerce
E-Commerce and
and its
its Benefits
Benefits
E-commerce and Traditional Commerce
►Brick and mortar.
►E-tailers.
►Clicks and mortar (bricks and clicks).

Chapter
14-23

SO 4 E-commerce and its benefits.


E-Commerce
E-Commerce and
and its
its Benefits

Benefits
Concept Check
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

Chapter
14-24

SO 4 E-commerce and its benefits.


E-Commerce
E-Commerce and
and its
its Benefits

Benefits
Concept Check
Each of the following represents an application of B2C
commerce except
a.

software sales.

b.

electronic retailing.

c.

data exchanges.

d.

stock trading.

Chapter
14-25

SO 4 E-commerce and its benefits.