Final answer:
Information technology has greatly affected modern business by reducing paper trails, making data alteration easier, changing the transaction process, and requiring the testing of additional controls due to digital risks. It plays a pivotal role in the size and scale of businesses and the nature of products and services in the information economy.
Step-by-step explanation:
Impact of Information Technology on Business
The use of information technology (IT) has significantly altered the landscape of modern business. Historically, IT has generally reduced the paper trail by transitioning many paper-based processes to digital formats, effectively conserving resources and improving efficiency. Alongside these benefits, IT makes it easier to alter data, providing tools for quick updates, revisions, and modifications which can be a double-edged sword in terms of data integrity and security. IT also affects the fundamental manner of transactions, streamlining communication, and enabling e-commerce, which reshapes how businesses operate. However, it's a misconception that IT reduces the number of controls to be tested. In fact, the complexity and increased risks associated with digital systems often necessitate additional controls and security measures to safeguard against cyber threats.
The influence of new information technologies like the Internet, GPS, or GIS is profound. It has created opportunities for small businesses to expand their reach beyond local boundaries, potentially increasing the number of competitors. Conversely, it might also foster a market dominated by large firms due to the ease of managing multiple operations worldwide and the potential emergence of 'winner-take-all' markets. This ongoing debate between the merits of small versus large firms will continue to be scrutinized by economists, businesspeople, and policymakers.
Information technology not only impacts the scale of business operations but also the very nature of products and services offered. Many modern products, such as software, and services like financial advice or travel planning, can be delivered digitally over increasingly affordable telecommunications networks. This shift has led to a rise in the trade of information-based commodities and contributed to globalization, reinforcing the transition towards an information economy.