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SU 13
IT Networks and Electronic Commerce
89
Accounting
Undergraduate 4
05/16/2015

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Term
What do CPAs need to know about computers?
Definition
As a licensed CPA, you will need to know computers communicate over networks so you can ascertain their vulnerability.
Term
mainframe communication
Definition
large mainframe computers dominated the electronic data processing filed in its first decades. Mainframes were arranged so that all processing and data storage were done in a single, central location.
Term
dumb terminals
Definition
no processing power and no CPU; used to communicate with the mainframe
Term
terminal emulation
Definition
remote connections are usually through personal computers rather than through dumb terminals. Mainframes are only still used at large institutions; this is more common.
Term
distributed processing
Definition
involves the decentralization of processing tasks and data storage and assigning these functions to multiple computers in separate locations.

Brought up by minicomputers; data needed locally can reside locally, reducing communications traffic.
Term
local area network (LAN)
Definition
any interconnection between devices in a single office or building.
Term
client-server model
Definition
most cost-effective and easy-to-administer arrangement for LANs; servers are centrally located and devoted to the functions that are needed by all network users.
Differ from peer-to-peer networks in that the devices play more specialized roles. Client (user) request services from server processes (centrally).
Term
client
Definition
object that uses the resources/requests the services of another object.
Term
client device
Definition
normally displays the user interface and enables data entry, queries, and the receipt of reports. Moreover, many applications run on the client computer.
Term
key to client-server model
Definition
it runs processes on the platform most appropriate to that process while attempting to minimize traffic over the network.
Term
three-tiered architecture
Definition
client, application, and database
Term
Is security more difficult in a centralized or decentralized system?
Definition
Security for client-server systems may be more difficult than in a highly centralized system b/c of numerous access points.
Unauthorized software may be installed.
Important files stored on a local computer may not be backed up properly by the users.
Applications may be written that are sub-standard, making data sharing difficult.
Term
Other aspects of LANs
Definition
LAN connects devices w/in a single office or home or among buildings in an office park. Key aspect here is that a LAN is owned entirely by a single organization.
LAN is most familiar network- can consist of few PCs and a printer.
Term
wide area network (WAN)
Definition
conglomerate of LANs over widely separating locations; spreads cost of ownership among multiple organizations
Term
publicly owned WANs
Definition
available to any user w/a compatible device.
Assets not paid for by user fees.
Public-switched networks use public telephone lines to carry data.
Economical, but the quality of data transmission cannot be guaranteed and security is highly questionable.
Term
privately owned WANs
Definition
profit-making enterprises. They offer fast, secure, data communication services to organizations that do not wish to make their own large investments in the necessary infrastructure.
Term
value-added networks (VANs)
Definition
private networks that provide their customers with reliable, high-speed secure transmission of data
private, third-party providers of common interfaces between organizations
Term
virtual private networks (VPNs)
Definition
relatively inexpensive way to solve the problem of the high cost of leased lines.
Term
intranet
Definition
type of WAN that permits sharing of information throughout an organization by applying Internet connectivity standards and Web software to the organization's internal network.
Term
extranet
Definition
consists of the linked intranets of two or more organizations, for example, of a supplier and its customers. Uses public Internet as transmission medium but requires a password for access.
Term
Internet
Definition
network of networks around the world; facilitates inexpensive communication and information transfer among computers, with gateways allowing servers to interface w/PCs.
Term
Internet backbone
Definition
Very high-speed Internet connections carry signals around the world and meet at network access points.
Term
How do Internet users obtain connections?
Definition
Most Internet users obtain connections from ISPs that in turn connect either directly to a gateway or to a larger ISP with a connection to a gateway.
Term
TCP/IP
Definition
suite of routing protocols (rules or standards) used to connect computers to the Internet; it is also built into network operating systems.
Term
HTTP
Definition
allows hyperlinking across the Internet rather than on just a single computer. A browser allows users to read HTML from any computer; this system is the World Wide Web.
Term
XML
Definition
XML is an open standard usable with may programs and platforms; XML codes all information in such a way that a user can determine not only how it should be presented but also what it is.
Unlike HTML, XML uses extensible codes.
Term
URL
Definition
unique address for every resource on the Web, made up of alphanumeric characters, periods, and forward slashes. URL is recognizable by any web-enabled device, but not necessarily accessible.
Term
cloud computing
Definition
popular term relating to on-demand access to resources that are accessed on the Internet and shared by others.

The entity has the ability to choose and pay for only the applications needed from the array (cloud) of resources, reducing the need for a large investments in IT infrastructure.
Term
client devices
Definition
devices of all sizes and functions can be connected to networks
Term
network interface card (NIC)
Definition
required to connect a device to a network. The NIC allows the device to speak the network's language/protocol. NIC function may be built into some devices.
Term
bandwidth
Definition
signal-carrying capacity of a transmission medium, such as fiber-optic cable or copper wire. Rough indication of the highest speed data can obtain when traveling through it.
Term
baseband
Definition
medium that can carry only one signal
Term
broadband
Definition
medium that can carry many signals
Term
hubs
Definition
simple; serve only to broadcast messages to every other device on the network

Hubs and bridges connect parts of a single network.
Term
bridges
Definition
improve traffic flow by dividing LANs into segments; more intelligent than hubs

Read the destination address and isolate the message to the segment where the destination device is located, greatly reducing unnecessary traffic on the network.

Hubs and bridges connect parts of a single network.
Term
gateways
Definition
devices that manage the flow of data between networks
Term
fiber-optic cable
Definition
extremely fine threads of glass or plastic; encased in a specialized cladding that turns the interior wall into a continuous mirror. The electrical signal is converted to pulses of light, which then bounce from wall to wall as they move down the fiber.
Moves a lot faster than through copper wire.
Term
advantages of fiber-optic cable over copper wire
Definition
greater bandwidth
light pulses not subject to electromagnetic interference
pulses cannot be “tapped”/interfered with
If an optical fiber breaks, the mirrored end immediately sends the transmitted signal back to the source, alerting the administration of the distance of the break.
Term
microwave transmission
Definition
involves propagating electrical signals through air and space instead of through metal wire or optical fiber
Term
satellite relay
Definition
involves transmitting the microwave signal to a satellite in orbit, which retransmits the signal to the destination back on Earth. Offers very high speeds and wide geographic coverage.
Term
protocol
Definition
set of standards for message transmission among the devices of the network; electronic communication networks require protocol
Term
Ethernet & frames
Definition
been the most successful protocol for LAN transmission. The Ethernet design breaks up the flow of data between devices into discrete groups of data bits called “frames.”
Term
How does ethernet work?
Definition
Follows “polite conversation” method.
When frames collide constantly on networks, the contending devices wait, then transmit again.
This design has been extraordinarily successful.
Term
switched networks (LAN vs. WAN)
Definition
In a LAN, all devices and all transmission media belong to one organization- makes for great efficiency and security. When communication must cross organizational boundaries or a new geographical range, a WAN is more appropriate.
Term
packet switching
Definition
data bits (frames) making up a message are broken up into packets of predefined length. Each packet has a header containing the electronic address for the device for which the message is intended. WAN uses this, not Ethernet.
Term
switch
Definition
hardware device that reads the address on each packet and sends it along the appropriate path to its destination.
Term
routers
Definition
more intelligent than hubs, bridges, or switches; have tables stored in memory that tell them the most efficient path along which each packet should be sent.
Routing is what makes the Internet possible.
Term
IP/decimal addressing
Definition
allows any device in the world to be recognized on the Internet through the use of standard-format IP address between #0 and 255.
Term
DHCP
Definition
allows tremendous flexibility on the Internet by enabling the constant reuse of IP addresses.
Term
IP addresses for routers and client devices
Definition
Routers generally have their IP addresses hardcoded when they are first installed. However, the individual client devices on most organizational networks are assigned an IP address by DHCP from a pool of available addresses every time they connect to the network.
Term
Wi-Fi family of protocols
Definition
supports client devices within a radius of about 300 feet around a wireless router; hotspot- usable area.
Term
advantages of Wi-Fi
Definition
Avoids collisions inherent in Ethernet by constantly searching for the best frequency within its assigned range to use.
Security was a problem in early incarnations of Wi-Fi, but encryption has helped.
Term
personal area network
Definition
Bluetooth standards operates over 30 feet; distance has created the personal area network (PAN).
In-ear bluetooth device.
Considerably slower than Wi-Fi.
Term
e-business
Definition
umbrella term referring to all methods of conducting business electronically (both internal and external communication included)
Term
e-commerce
Definition
referring to the conduct of financial transactions with outside parties electronically
B2B, B2C, C2C
Term
extranet
Definition
one means of carrying on e-commerce; extranets rely on the established communications protocols of the Internet; based on less formal agreements between trading partners than EDI and requires the sending firm to format the documents into the format of the receiving firm.
Term
firewall
Definition
provide security
Term
specific concerns of e-commerce
Definition
Transacting parties must be correctly identified (authentication).
Circumstances in which a binding agreement can be made must be agreed to, especially in B2B applications.
Encryption used to maintain the confidentiality and integrity of information transmitted electronically.
Reliable record of transaction must be preserved.
Potential customers must be able to trust listed prices and discounts.
Payment data must be verifiable.
Both parties' systems must be robust- up and running at all times.
Term
B2B Benefits
Definition
Reduced purchasing costs.
Increasing market efficiency (= lower costs).
Greater market intelligence.
Decreased inventory levels (JIT, less working capital necessary).
Term
B2C Benefits
Definition
One of the fastest-growing segments of the economy.
Almost exclusively conducted through the Internet.
Reduced costs, increased efficiency, authorization issues on a smaller scale, no need to be concerned w/IT infrastructure on the customer's end.
Term
electronic funds transfer (EFT)
Definition
e-commerce application provided by financial institutions worldwide that enables the transfer of funds via an access device
Ex) direct deposit
Term
How does EFT work?
Definition
EFT transaction costs are lower than for manual systems b/c documents and human intervention are eliminated from the transaction process. Transfer in less than 24 hours. Opportunities for clerical error greatly reduced.
Most important EFT application is check collection.
Term
smart cards
Definition
contain computer chips rather than magnetized stripes and can therefore store data and security programs. Not only does it store value but it also authenticates transactions, such as by means of its digital signature.
Term
disadvantage of electronic money
Definition
not covered by FDIC; Fed rules concerning EFT also do not extend to electronic money.
Term
electronic data interchange (EDI)
Definition
EDI is the leading method of conducting B2B e-commerce. EDI involves the communication of data in a format agreed to by the parties directly from a computer in one entity to a computer in another entity.
Term
How do you implement EDI?
Definition
Successful EDI implementation begins with mapping the work processes and flows that support achievement of the organization's objectives.
Term
advantages of EDI
Definition
Reduced clerical errors.
Increased transaction speed.
Elimination of repetitive clerical tasks, such as document preparation, processing, and mailing
Use of digital rather than physical record storage
Term
disadvantages of EDI
Definition
Information may be insecure, so end-to-end data encryption should be used.
Data may be lost.
Transmissions to trading partners may fail.
EDI is more complex than simpler B2B arrangements.
Term
B2B commerce
Definition
Can be used to speed up the order and fulfillment process. EDI arrangement can help automate the process.
Partners must have a common electronic document format and a pre-existing agreement under which such orders will be accepted and filled without human intervention.
Term
costs of EDI
Definition
Specialized software.
Dedicated hardware.
Legal costs.
Process re-engineering/ employee retraining.
Enhanced security and monitoring.
Term
standards
Definition
concern procedures to convert written documents into a standard electronic document- messaging format to facilitate EDI
ANSI X.12
Term
conventions
Definition
procedures for arranging data elements in specified formats for various accounting transactions
Term
data dictionary
Definition
prescribes the meaning of data elements, including specification of each transaction structure
Term
transmission protocols
Definition
rules used to determine how each electronic envelope is structured and processed by the communications devices
Term
crucial element of EDI arrangement
Definition
the exchange of network and sender/recipient acknowledgment messages; these serve as a nonrepudiation tool.
Term
point-to-point system
Definition
requires the use of dedicated computers by all parties
Term
VANs
Definition
VANs are private, third-party providers of common interfaces between organizations
Subscribing to a VAN eliminates the need for one organization to establish direct computer communication with a trading partner. VANs also eliminate the need for dedicated computers waiting for incoming messages.
Once data are in standard format, VAN handles all aspects of communication.
Term
EDI Implications for Control
Definition
EDI eliminates the paper documents, both internal and external, that are the traditional basis for many controls, including internal and external auditing.
An organization with EDI may even eliminate mirror paper documents.
EDI advantage is a compressed business cycle with lower year-end receivables balances.
Term
encryption technology
Definition
vital to the security and therefore the success of e-commerce, especially with regard to transactions carried out over public networks.
Term
sender's encryption program
Definition
encodes the data prior to transmission; recipient's program decodes it at the other end. Unauthorized users may be able to intercept the data, but without the encryption key, they will be able to decode it.
Term
Is encryption more secure when performed through hardware or software?
Definition
software
Term
Does encyption use increase system overhead?
Definition
Yes.
Term
public-key (asymmetric) encryption
Definition
communicating parties create mathematically related pairs of keys; one key is made public (encyrpts), the other is kept private (decrypts).
Term
symmetric encryption
Definition
communicating parties agree on a single (private) key
strength comes from length; the parties must have a secure way of sharing the key.
Term
digital certificates
Definition
data files created by trusted third parties called certificate authorities
Term
certificate authority
Definition
establishes relationship with identity that wants a digital certificate, then creates a coded electronic certificate that contains the holder's name, its public key, serial number, an expiration date
Term
public-key infrastructure
Definition
relieves the parties from the need to establish their own pairs of keys when they want to communicate securely.

Public-Key Infrastructure allows buyers to securely exchange credit card numbers with Internet vendors.
Term
digital signatures
Definition
means of authenticating an electronic document such as a PO, acceptance of a contract, or financial information.
Term
How are digital signatures encoded and decoded?
Definition
The sender uses its private key to encode all or part of the message, and the recipient uses the sender's public-key to decode it. Hence, if that key decodes the message, the sender must have written it.
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