END OF CHAPTER MATERIAL

CONCEPT CHECK

1. 1. Which of the following statements is true?
   1. E-business is a subset of e-commerce.
   2. E-commerce is a subset of e-business.
   3. E-business and e-commerce are exactly the same thing.
   4. E-business and e-commerce are not related.
2. 2. An electronic hardware device that is located at the gateway between two or more networks is a
   1. packet switch
   2. router
   3. URL
   4. protocol
3. 3. The type of organization that serves as the main trunk line of the Internet is called a
   1. local ISP
   2. global ISP
   3. regional ISP
   4. backbone provider
4. 4. Which of the following is not a direct advantage for the consumer from e-commerce?
   1. Access to a broader market
   2. More shopping convenience
   3. Reduced order-processing cost
   4. Information sharing from the company
5. 5. Each of the following represents a characteristic of B2B commerce except
   1. electronic data interchange
   2. electronic retailing
   3. data exchanges
   4. preexisting business relationships
6. 6. Each of the following represents an application of B2C commerce except
   1. software sales
   2. electronic retailing
   3. data exchanges
   4. stock trading
7. 7. 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?
   1. Consent
   2. Use and retention
   3. Access
   4. Onward transfer and disclosure
8. 8. Which of the following processes within a supply chain can benefit from IT enablement?
   1. All processes throughout the supply chain
   2. Only internal processes within the supply chain
   3. Only external processes within the supply chain
   4. Exchange processes between a company and its suppliers
9. 9. When a company has an e-business transaction with a supplier, it could be using
   1. the Internet
   2. an intranet
   3. an extranet
   4. either the Internet or an extranet
10. 10. Intranets are used for each of the following except
    1. communication and collaboration
    2. business operations and managerial monitoring
    3. Web publishing
    4. customer self-service
11. 11. When there is no necessity for a preexisting relationship between buyer and seller, that transaction is more likely to be classified as
    1. B2B
    2. B2C
    3. B2E
    4. either B2B or B2C
12. 12. Which of the following IT controls would not be important in an extranet?
    1. Encryption
    2. Password
    3. Antivirus software
    4. Penetration testing
    5. All of the above are important IT controls.
13. 13. A company's computer network uses Web servers, HTML, and XML to serve various user groups. Which type of network best serves each of the following users?

    Employees	Suppliers
    a. Intranet	Extranet
    b. Intranet	Internet
    c. Internet	Extranet
    d. Internet	Internet

14. 14. An extensible markup language designed specifically for financial reporting is
    1. Internet EDI
    2. XML
    3. XBRL
    4. XFRL

DISCUSSION QUESTIONS

1. 15. (SO 1) How do e-commerce and e-business differ?
2. 16. (SO 2) What was the original purpose of the network of computers that eventually became the Internet?
3. 17. (SO 2) Why was ARPANET designed with many different alternative routes for network traffic?
4. 18. (SO 2) Why is a standard protocol necessary in computer networks?
5. 19. (SO 2) How quickly did Internet usage by the public grow after the Internet was opened to business transactions in 1994?
6. 20. (SO 3) Describe the relationship between national backbone providers, regional ISPs, and local ISPs.
7. 21. (SO 3) What is the importance of a standard formatting language for Web pages and a standard addressing system?
8. 22. (SO 4) Which types of costs can be reduced when a company decides to engage in B2C e-commerce on the Internet?
9. 23. (SO 4) What are the differences between bricks-and-mortar retailers and clicks-and-mortar retailers?
10. 24. (SO 5) According to the Online Privacy section of the AICPA Trust Services Principles, what types of personal information should be protected?
11. 25. (SO 5) If you could condense the ten areas of Online Privacy in the AICPA Trust Services Principles, into a shorter list (three-, four-, or five-point list), how would you word that list?
12. 26. (SO 5) What is meant by “monitoring and enforcement” regarding online privacy practices?
13. 27. (SO 6) How is e-business a broader concept than e-commerce?
14. 28. (SO 6) Describe the concept of a supply chain.
15. 29. (SO 6) Why is it important to ensure an efficient flow of goods throughout the supply chain?
16. 30. (SO 6) Which functions within the supply chain can be enhanced through the use of e-business?
17. 31. (SO 6) How are activities in the supply chain interdependent?
18. 32. (SO 6) In what ways are the characteristics of e-business different from those of e-commerce?
19. 33. (SO 8) What are the three levels of network platforms that are utilized in e-business, and which groups use each level?
20. 34. (SO 8) Which type of users should have access to an intranet?
21. 35. (SO 8) Which type of users should have access to an extranet?
22. 36. (SO 9) What types of controls should be used to properly limit access in intranets and extranets?
23. 37. (SO 10) Why is the use of XML advantageous in Internet EDI?
24. 38. (SO 10) In what ways are XBRL financial statements advantageous compared with traditional paper financial statements?
25. 39. (SO 11) What are some of the ethical obligations of companies related to e-commerce?
26. 40. (SO 11) Is there a difference between ethical obligations and legal obligations with regard to online privacy?

BRIEF EXERCISES

1. 41. (SO 1) Much of the e-business and e-commerce conducted by companies uses the Internet as the form of electronic communication. Describe other electronic means to conduct e-business or e-commerce.
2. 42. (SO 3) How does the use of HTML, URLs, domain names, and SSL contribute to an Internet that can be used worldwide?
3. 43. (SO 4) Describe the benefits to the consumer of B2C sales.
4. 44. (SO 4) Describe the benefits to the company of B2C sales.
5. 45. (SO 6) Describe the benefits to a company that engages in B2B transactions via the Internet.
6. 46. (SO 5) What are the ten areas of privacy practices described in the Online Privacy section of the AICPA Trust Services Principles?
7. 47. (SO 6) Describe the activities that take place in the supply chain of a manufacturing firm.
8. 48. (SO 6) Describe the differences between B2C and B2B.
9. 49. (SO 9) Explain the importance of user authentication and network break-in controls in extranets.
10. 50. (SO 10) What are the advantages of Internet EDI over traditional EDI?

PROBLEMS

1. 51. (SO 2) Explain the hardware and technology standards that were developed during the ARPANET that were an important foundation for the Internet of today.
2. 52. (SO 4) The Pizza Pie Pit is a local chain of pizza restaurants in Dallas, Texas. The chain has 30 locations throughout the city and its suburbs. The management is considering opening a website to conduct e-commerce with customers. Describe any benefits that might be derived from this move.
3. 53. (SO 5) Using a search website, enter the term “privacy seal” and search. Answer the following questions:
4. What is the purpose of a Web privacy seal?
   1. Which organizations provide Web privacy seals to Web-based companies?
   2. What are the advantages to a company that maintains a Web privacy seal?
   3. What are the benefits to a consumer of shopping from a website that has a privacy seal?
5. 54. (SO 5) Visit the website www.cpawebtrust.org and answer the following questions:
   1. What is a WebTrust seal?
   2. Which organization sanctions the WebTrust seal?
   3. What kind of professional can provide a WebTrust seal to a company?
   4. What must this professional do before providing a WebTrust seal?
6. 55. (SO 5) Enter the website of a popular retail company that sells a large volume of goods or services on the Internet. Search for the company's “Privacy Policies” on that website. If you do not find any privacy policies, continue visiting other company websites until you do find privacy policies. Once you have found a company with privacy policies, describe how the company policies do or do not meet the privacy practices in the AICPA Trust Services Principles.
7. 56. (SO 8) EDIPipeline is an Internet EDI solution for small to mid-size companies. View the Web page at http://www.edipipeline.com. Click on the link called “Trading Partners.” Examine two or three company names you recognize. Describe how this EDI system might be advantageous for a small or mid-size company seeking to be a vendor to a large corporation such as Coca-Cola.
8. 57. (SO 10) Read the article at http://xbrl.us/learn/documents/betterreporting.pdf. Briefly describe what this article says about how XBRL has transformed financial reporting.
9. 58. (SO 5) List and describe the privacy practices recommended by the AICPA Trust Services Principles Privacy Framework. If you have ever made a purchase online, you have likely seen these practices in use. Provide any examples from your own personal experience.
10. 59. (SO 5) Describe the ethical obligations of companies to their online customers.

CASES

1. 60. Beach Beauties Corporation (BBC), is a regional wholesaler of women's swimwear and beach attire. The company is located in Jacksonville, Florida, and it sells to retail stores in resort communities in Florida, Georgia, and the Carolinas. BBC employs six salespeople, with each one having responsibility for collecting sales orders from one of the following territories: Southern Florida, Florida Gulf Coast, Eastern Florida, Georgia, South Carolina, and North Carolina.

   Each sale representative mails seasonal catalogs to the customers in his or her territory. Online catalogs are also provided via the company's website. Sales orders are obtained directly by the sales representatives via e-mail. On a daily basis, the sales representatives submit orders to the corporate office via the Internet; a Web browser client is used to enter the e-mail orders into a dedicated Web server. The sales representatives maintain files consisting of each customer's e-mail orders, accompanied by a printout of the sales orders entered in the computer. All deliveries are sent via common carrier from the Jacksonville headquarters to each of the customer locations.

   Recently, BBC has experienced delivery problems. Namely, a few retail stores located on the eastern Georgia seaboard have claimed that they never received their deliveries. Ellen Hainett, BBC's controller, has been investigating these problems along with Alex Ruminez, the Georgia sales representative. Through her review of the shipping records, Ellen discovered that each of the problem scenarios involved shipment to a warehouse rather than to the customer's retail store. Interestingly, the sales order files maintained by Alex indicate that shipment should have been set up for delivery to the respective retail store locations.

   Upon further investigation, Ellen reviewed the company's access log and verified that Alex's and the other sales representatives' authorized passwords were the only ones used to access the company's Web server.

   Required:

   1. Speculate as to potential causes of this problem.
   2. What additional information would be needed to determine the actual cause of this problem?
   3. What controls could be implemented to avoid repeated instances of this problem?
2. 61. Caseline Analytics is a financial services consulting firm that assists its clients with financial analyses surrounding proposed business ventures. John Y. Case is the firm's founder and project director. As such, he is responsible for preparing most of each client firm's financial analyses and reports, as well as presenting the results to each client's management. Due to the varying numbers of managers who may make up a client's top management, Case always prepares at least a dozen report copies so that there are plenty to distribute to all persons in attendance at the presentation.

   Data for financial analyses are obtained directly from the accounting and production databases of the firm's clients. Direct queries are prepared by Case's staff accountants, and the resulting presentation reports are prepared by the staff and reviewed by Case. This is a time-consuming process, and many of Case's clients have demanded more current information. This problem recently led Case to investigate the possibility of developing a software package that could produce the financial analyses and reports automatically.

   As Case considers the significant investment that would be required to program a new system, he is concerned about the loss of control that may be inherent in an automated system. For instance, he worries about the accuracy and completeness of analyses and reports prepared automatically.

   Required:

   Perform an online research of XBRL at www.xbrl.org and determine whether or not XBRL would be appropriate for Case's business. Would XBRL be more effective and reliable? Why, or why not? Your response should focus on the existence of any enhancements or concerns that are likely to result in terms of the timeliness of information, internal controls, and security.

CONTINUING CASE: ROBATELLI'S PIZZERIA

Consider the case of Robatelli's Pizzeria as presented at the end of Chapter 1. In particular, reread the sections on ordering and Internet orders.

Required:

Answer the following questions regarding Robatelli's:

1. Discuss whether Robatelli's Internet order activities can be termed e-commerce.
2. Given the privacy practices described in the AICPA Trust Services Principles, describe the kind of customer data that Robatelli's could reasonably collect and store, and also describe some data that Robatelli's should not collect and store. Explain the reasons for these differences.
3. Describe the internal controls related to Internet orders that Robatelli's should have in place.

SOLUTIONS TO CONCEPT CHECK

1. (SO 1) The following statement is true: b. E-commerce is a subset of e-business. E-business is a broader concept that includes e-commerce, as depicted in Exhibit 14-1.
2. (SO 2) An electronic hardware device that is located at the gateway between two or more networks is a c. router. A router is a hardware device that connects networks at a network gateway.
3. (SO 3) The type of organization that serves as the main trunk line of the Internet is called a d. backbone provider. Backbone providers provide and maintain the main trunk lines of the Internet, as shown in Exhibit 14-3.
4. (SO 4) c. Reduced order-processing costs is not a direct advantage for the consumer from e-commerce. Reduced order processing cost is a direct benefit to the seller, not the consumer. Lower cost may lead to lower prices for the consumer also, but this would be an indirect advantage to the consumer. The other answers are direct benefits to the consumer.
5. (CIA Adapted) (SO 4) Each of the options represents a characteristic of B2B commerce except b. electronic retailing, which is a characteristic of B2C.
6. (CIA Adapted) (SO 4) Each of the options represents an application of B2C commerce except c. data exchanges, which are a characteristic of B2B.
7. (SO 5) Before forwarding customer data, an organization should receive explicit or implicit consent of the customer. This describes d. onward transfer and disclosure of the AICPA Trust Services Principles online privacy practices. When an organization will be forwarding customer data to third parties, it should provide a policy to consumers to disclose the onward transfer.
8. (SO 6) a. All processes throughout the supply chain can benefit from IT enablement. Any process throughout the supply chain is a potential process that could benefit from IT enablement.
9. (SO 8) When a company has an e-business transaction with a supplier, it could be using d. either the Internet or an extranet. Two companies could transact business using either the Internet or an extranet. An intranet is usually limited to those inside a company, therefore excluding other trading partners.
10. (CMA Adapted) (SO 8) Intranets are used for each of the options except a. customer self-service. Customers would not access the intranet, as it is for internal use.
11. (SO 4) When there is no necessity for a preexisting relationship between buyer and seller, that transaction is more likely to be classified as b. B2C. This is a characteristic of business to consumer. Business-to-business transactions presume a preexisting relationship.
12. (SO 8) Of the given IT controls in an extranet, e. all are important IT controls. Each option is either a user authentication or hacking IT control that should be implemented to protect an extranet.
13. (CIA Adapted) (SO 8) A company's computer network uses Web servers, HTML, and XML to serve various user groups. The following type of network best serves the following user: Employees

    Employees	Suppliers
    a. Intranet	Extranet

    An intranet and extranet are similar; however, an intranet aids in internal communication, whereas an extranet facilitates communication (and trading) externally with the company's business partners.

14. (SO 10) An extensible markup language designed specifically for financial reporting is c. XBRL. XBRL stands for eXtensible Business Reporting Language.