Electronic Data Interchange (EDI) is a system that allows businesses to exchange documents (purchase orders, invoices, shipping notices) electronically, improving efficiency and accuracy.
Correct Answer (A - A Just-in-Time Purchasing Environment)
Just-in-time (JIT) purchasing requires real-time inventory management to reduce waste and costs.
EDI improves JIT by automating purchase orders, reducing lead times, and preventing stockouts.
The IIA GTAG 8: Audit of Inventory Management highlights that JIT purchasing benefits the most from automation through EDI.
Why Other Options Are Incorrect:
Option B (A large volume of custom purchases):
Custom purchases vary significantly in specifications, making standard EDI transactions less effective.
Option C (A variable volume sensitive to material cost):
While EDI helps with volume fluctuations, cost-sensitive purchasing requires additional financial analysis beyond EDI automation.
Option D (A currently inefficient purchasing process):
EDI improves efficiency, but implementing it in a failing process without first optimizing procedures could lead to automation of inefficiencies.
IIA GTAG 8: Audit of Inventory Management – Discusses automation benefits in JIT purchasing.
IIA Practice Guide: Auditing IT Controls – Covers EDI as a key tool for procurement efficiency.
Step-by-Step Explanation:IIA References for Validation:Thus, the greatest benefit from EDI is in a Just-in-Time (JIT) purchasing environment (A).
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