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Chapter 3 THE INTERNET, INTRANETS, AND ELECTRONIC COMMERCE The Internet electronic highway, consisting of various standards and protocols The Internet has no central command and control structure. TCP (Transmission Control Protocol)

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Chapter 3


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The Internet

  • electronic highway, consisting of various standards and protocols

  • The Internet has no central command and control structure.

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TCP (Transmission Control Protocol)

  • a protocol for dividing electronic messages into "packets" of information and then reassembling these packets at the receiving end

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Internet Protocol (IP) Addresses

  • specific location of a computer on the Internet--a unique identifier (e.g., 408.78.230.2)

  • domain name is an alias that can be used in place of the IP number (

  • Domain names and their corresponding IP addresses are kept in the domain name servers (DNSs).

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  • in-house networks that use Internet-type protocols.

  • recently Cisco has announced joint ventures with TCI and others to bring intranet-type technology to homes

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Intranet Security

  • Firewalls limit access to information on company servers from the rest of the world.

  • Proxy servers filter all outgoing requests for information. Ethical and moral issues emerge from proxy server filters.

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Client-Server Technology

  • A server is program that constantly runs and exchanges information with users who request it.

  • Clients are programs that access and exchange information with servers.

  • Examples include mail servers, file servers (File Transfer Protocol--FTP sites), web servers.

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World Wide Web

  • A web server is a server that allows a user (client) to access documents and run computer that reside on remote computers.

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Electronic Payment Systems

  • electronic bill payment systems: payment instructions sent to a bank

  • credit card systems: credit card information supplied to secure commerce server

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Electronic Payment Systems

  • Secure Electronic Transaction (SET) systems: special type of credit card payment system established by Visa and MasterCard

  • Secure Sockets Layer (SSL) is another industry-wide protocol for enhancing security and integrity of transactions on the internet.

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Security for Electronic Transactions

  • Encryption involves using a password or digital key to scramble a readable (plaintext) message into an unreadable (ciphertext) message.

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Types of Encryption Systems

  • Secret Key

  • Public Key

  • Hybrid

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Secret key Encryption

  • the same key is used for both encrypting and decrypting a message

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Public Key Encryption

  • two keys are used in association with each encrypted message, one key to encrypt the message and another key to decrypt it

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Hybrid Systems and Digital Envelopes

  • A random key generated by sender encrypts message.

  • Using the recipient’s public key, the random key is encrypted, and both the encrypted message and the random key is sent to the recipient in a digital envelope.

  • The recipient then uses his/her private key to decrypt the random key and then decrypt the message.

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Digital Signatures

  • What is a digital signature?

  • There are significant implications for accountants. For example,

    Impact on how transactions will be authorized

    Impact on how authenticity of transactions will be verified by auditors

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  • various techniques for analyzing encrypted messages for purposes of decoding them without legitimate access to the keys

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factoring attack

  • the private key can be deduced by factoring the public key into to prime numbers

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key attacks

  • most attacks against public key systems are likely to be made at the key management level

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Digital Certificates

  • digital documents that attest to the fact that a particular public key belongs to a particular individual or organization

  • Digital certificates are issued by some certifying authority (CA).

  • Examples of Digital Certificates

    Fidelity NetBenefits

    Discover Dean Witter

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  • The CA creates a digital certificate by digitally signing a document that includes the name of the person being certified, that person s public key, the name of the CA, the expiration date of the key being certified, and the expiration date of the certificate.

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Certificate Revocation Lists (CRLs)

  • a list of public keys that have been revoked before their expiration dates.

  • Certificate Chains: certificates can be linked together in chains.

  • Certificate Signing Units: protect private keys.

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Virtual Cash Systems

  • Digital Cash: a bank digitally signs an electronic bank note

  • Blinded Digital Cash: a bank to issues digital cash so that it is unable to link the payer to the payee.

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Virtual Cash in Electronic Cards

  • Smart cards are hand-held electronic cards that are used for payments.