Audit of e-Commerce (PART 2) signatures, and documents, ensuring that e-

commerce activities are legally binding.

Types of E-Commerce Service (continuation)
Key provisions:
5. Payment Processing Services
 Legal recognition of electronic signature
- Payment processing services facilitate
 Consumer protection measures
online payments between consumers and
 Regulation of spam and cybercrime
businesses, acting as intermediaries to ensure secure
transactions. 2. Data Privacy Act of 2012 (Republic Act No.
10173)
Examples: PayPal, Stripe, Square
- This act governs the processing of
Key features:
personal data and ensures that businesses handling
 Secure payment gateways consumer information comply with privacy and
 Multi-currency support security standards.
 Mobile payment options
Key provisions:
Impact: Reliable payment processing is critical for e-
 Consent requirements
commerce, as it builds trust with consumers and
 Data protection measures
facilitates smooth transactions, contributing to over-all
 Rights of data subjects
business success.
3. Consumer Act of the Philippines (Republic Act
6. Affiliate Marketing Services
No. 7394)
- Affiliate marketing services enable
- This act protects consumers against
individuals or companies to earn commission by
deceptive, unfair, and unconscionable sales practices.
promoting products or services from other
businesses. Key provisions:
Example: Amazon Associates, ShareASale, CJ  Disclosure requirements
Affiliate  Return and refund policies
 Consumer complaint mechanisms
Key features:
4. Cybercrime Prevention Act of 2012 (Republic
 Commission structures
Act no 10175)
 Tracking and reporting
 Marketing support - This law aims to prevent and penalize
cybercrimes, including identity theft, cyberbullying,
Impact: Affiliate marketing has become a significant
and online fraud.
revenue stream for many businesses, leveraging the
reach and influence of content creators to expand Key provisions:
market presence.
 Criminalization of cyber offenses
Legal Aspect of E-Commerce  Cooperation mandates
 User reporting systems
1. Republic Act No. 8792 (E-Consumer Act of
2000) 5. Intellectual Property Code of the Philippines
(Republic Act No. 8293)
- This act provides a legal framework for
electronic transactions in the Philippines. It - This code protects intellectual property
recognizes the validity of electronic contracts, rights, crucial for business dealing with digital content
and trademarks.
Key provisions: position. This includes the disclosure of
significant accounting policies and the
 Copyright protectio
basis of preparation.
Key Accounting Standards Governing the E-
 IAS 7: Statement of Cash Flows
Commerce Industry
 IAS 7 requires entities to present
 IFRS 15: Revenue from Contracts with
information about cash inflows and
Customers
outflows, facilitating the understanding of
 IFRS 15 provides a framework for liquidity and financial viability.
recognizing revenue in a way that reflects
 IAS 8: Accounting Policies, Changes in
the transfer of goods or services to
Accounting Estimates and Errors
customers in exchange for consideration.
 IAS 8 addresses how entities should select
 E-commerce companies must recognize
and apply accounting policies, including the
revenue when a customer receives the
disclosure of changes and corrections.
goods or services purchased.
 IAS 12: Income Taxes
 IFRS 16: Leases
 IAS 12 prescribes the accounting treatment
 IFRS 16 sets out the principles for the
for income taxes, including deferred tax
recognition, measurement, presentation,
liabilities and assets.
and disclosure of leases.
 IAS 10: Events After the Reporting Period
 n
 IAS 10 outlines the treatment of events
 Trademark Registration
after the reporting period but before the
 Enforcement Mechanisms financial statements are issued.

 Many e-commerce businesses may lease  IAS 19: Employee Benefits

properties or equipment.
 IAS 19 addresses the accounting for
 IFRS 9: Financial Instruments employee benefits, including pensions and
other post-employment benefits.
 IFRS 9 addresses the classification,
measurement, and impairment of financial  E-commerce businesses must comply with
instruments. this standard to accurately report
obligations related to employee benefits,
 E-commerce companies often engage in affecting overall financial health.
transactions involving financial instruments,
such as trade receivables and payables. Audit Consideration for the e-Commerce Industry

 IAS 1: Presentation of Financial Statements 1. Understanding the business environment

 IAS 1 outlines the overall requirements for ISA 315: Identifying and Assessing the Risks of
the presentation of financial statements, Material Mistatement
including structure and content.
 Auditors must obtain an understanding of
 E-commerce companies must ensure their the entity and its environment, including its
financial statements are clear and internal controls.
comparable, providing relevant information
2. Revenue Recognition
that reflects their performance and financial
ISA 240: The Auditor’s Responsibilities Relating ISA 240: The Auditor’s Responsibilites Relating to
to Fraud in an Audit of Financial Statements Fraud in an Audit of Financial Statements
 Auditors need to be vigilant regarding the  Auditors are tasked with identifying the risk
risk of fraud, particularly in revenue of fraud that may result in material
recognition. E-commerce firms recognize mistatement. Given the anonymous nature
revenue from various sources. Auditors of online transactions, e-commerce
should evaluate compliance with IFRS 15, companies are particularly vulnerable to
ensuring revenue is recognized when fraud.
performance obligations are satisfied. This
7. Compliance with Laws and Regulations
involves testing transactions to confirm that
they are recorded in the correct accounting ISA 250: Consideration of Laws and Regulations
period. in an Audit of Financial Statements
3. Internal Control Systems  Auditors must consider wether the entity is
complying with applicable laws and
ISA 330: The Auditor’s Responses to Assessed
regulations. E-commerce business must
Risks
adhere to various laws governing online
 Auditors must respond to the risks transactions, consumer protection, and
identified during the audit process. The data privacy. Auditors should evaluate
reliance on technology in e-commerce compliance with the E-Commerce Act of
necessitates a thorough evaluation of 2000 in the Philippines and other relevant
internal controls over financial reporting, regulations, ensuring that the company’s
including controls over cash receipts, practices align with legal requirements.
inventory management, and data integrity.
8. Subsequent Events and Going Concern
Auditors should assess the effectiveness of
controls in preventing and detecting errors ISA 570: Going Concern
or fraud.
 Auditors need to assess the entity’s ability
4. Cybersecurity and Data Privacy to continue as going concern. Given the
rapidly changing nature of the e-commerce
ISA 501: Audit Evidence- Specific Considerations
landscape, auditors must evaluate whether
for Selected Items
there are events after the reporting period
 This standard emphasizes the need for that may impact the business’s viability.
sufficient appropriate audit evidence. E- This includes changes in market
Commerce companies deal with sensitive conditions, regulatory updates, or shifts in
customer information, making cybersecurity consumer behavior that could affect
a significant concern. revenue streams.
5. Inventory Valuation and Management
Revenue Recognition and Inventory Management Key Market Trends in the E-Commerce Industry
and Their Audit Implications
 Proper inventory management is crucial for
e-commerce entities, which often hold 1. Shit to mobile commerce (m-commerce)
substantial amounts of inventory.
2. Increased use of aritifcial intelligence and
6. Fraud Detection and Prevention machine learning
3. Rise of subscription-based models
 4. Focus on sustainability and ethical
practices
5. Globalization and cross-border trade

Prepared by: H. RACMAN, PRINCESS ALAMINA