Accounting information systems controls and process 2nd tunnwe weickgenannt chapter 15

The market segments of ERP software systems 6.. Chapter Overview of ERP Systems Overview of ERP Systems Enterprise Resource Planning ERP system integrates all business processes and fun

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Chapter

15-1

Prepared by Coby Harmon University of California, Santa Barbara Westmont College

Prepared by Coby Harmon University of California, Santa Barbara

Westmont College

SECOND EDITION

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Chapter

15-2

IT Infrastructure for E-Business

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Chapter

15-3

1. The overview of an ERP system

2. The history of ERP systems

3. Current ERP system characteristics

4. The modules of an ERP system

5. The market segments of ERP software systems

6. Implementation issues of ERP systems

7. The benefits and risks of ERP systems

8. ERP systems and the Sarbanes–Oxley Act

Study Objectives

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15-4

Real World

annual sales in excess of $500 million Believing that its old accounting systems were antiquated, the management at

Agri-Beef recently switched to an ERP system They experienced a very successful implementation that took only six weeks and they began

experiencing benefits immediately The treasurer of the company, while describing the benefits with regard to the preparation and handling of

intracompany transactions, said the following:

“With the old method, we had to walk each transaction through Now we can post transactions straight through to another division’s general ledger account.”

The improved efficiency resulted in two check runs instead of 22 runs, and a 200 man hour savings per month.

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Chapter

Overview of ERP Systems

Enterprise Resource Planning (ERP) system integrates all

business processes and functions into a single software

system, using a single database

ERP system components:

1 Financials

2 Human resources

3 Procurement and logistics

4 Product development and

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Exhibit 15-1

An ERP System

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SO 1 The overview of an ERP system

Concept Check

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Chapter

History of ERP Systems

ERP systems:

► Developed during the 1960s and 1970s

► First generation was materials requirements planning

(MRP) software

► MRP evolved into manufacturing resource planning

(MRP II)

► ERP software did not become popular with large

corporations until the 1990s

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History of ERP Systems

Concept Check

In the late 1990s, the Y2K compatability issue was concerned

primarily with computer systems’

a file retrieval capability

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15-10 SO 3 Current ERP system characteristics

Current ERP System Characteristics

EDI, Internet EDI, or extranets are used to connect a

company’s ERP system to the IT systems of its suppliers and

customers

Exhibit 15-2

An ERP II System

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Chapter

In the years since 2004, spending on ERP systems increased or

decreased based on several factors.

1.Companies cannot allow their ERP systems to become outdated.

2.Need to improve customer service through standardizing and combining

business processes.

3.Global companies may have separate ERP systems in different countries

4.Aging ERP systems need replacement.

5.Bigger IT budgets as economic conditions improve.

6.Many companies needed upgraded systems to comply with Sarbanes–

Oxley Act.

7.Many companies wanted to take advantage of new technologies such as

cloud-based ERP systems.

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Chapter

15-12

Real World

Minneapolis-based manufacturer and seller of luxury motorcycles, began business in 2002 Within one year, Viper was looking for

an accounting software system that would tie together the

company’s accounting with manufacturing, order processing, and other business functions, while complying with Sarbanes–Oxley Viper first selected SAP Business One® as its ERP software

system, and later adopted SAP Business By-Design.® These IT Solutions have helped Viper realize benefits in terms of operating efficiencies, financial transparency, and setting internal controls.

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SO 3 Current ERP system characteristics

Concept Check

Which of the following is not one of the reasons for increased

spending on ERP systems in recent years?

b Globalization and increased competitive pressures

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ERP Modules

The top-selling ERP system for large

corporations and organizations is SAP

Exhibit 15-4

SAP® View of ERP Modules

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ERP Modules

Illustration: Match the ERP modules

with their purpose of the related

processes

a Taking customer orders and

preparing for the impending revenue and cash collection

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ERP Modules

b Maintenance of the general

ledger and supporting journals and subledgers

processes

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ERP Modules

c Keeping track of purchasing and

movement of goods and materials

processes

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processes

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15-19

ERP Modules

e Data mining and other

processes for obtaining feedback and supporting managerial decision making

processes

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processes

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15-21 SO 5 The market segments of ERP software systems

Market Segments of ERP Systems

Tier One Software

► Usually implemented in very large organizations

► Minimum cost to purchase is approximately $350,000

Often, the cost exceeds $1 million

► Three most popular ERP systems in tier one are SAP,

Oracle, and Peoplesoft

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Chapter

Cloud Based ERP

All ERP vendors have developed ERP products for cloud

computing For example,

► SAP offers a cloud-based ERP system for small to

medium-sized entities (SMEs) called SAP Business ByDesign

► Customers who use cloud-based software need only a small IT

system

► ERP system can be used through a computer with Internet

access and a Web browser.

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Chapter

15-23

Real World

manufacturer and seller of headphones exclusively tailored for snowboarders, skateboarders, and other action-sports

enthusiasts It has experienced tremendous growth over the past decade During one period, it grew 300 percent over four years The growth became explosive when its products were accepted

by Best Buy, Circuit City, and Target In response to this growth, SkullCandy sought a business software system that would meet its accounting and reporting needs but could also easily scale to match the company’s growth The company chose SAP Business ByDesign, a cloud-based system, as its ERP system.

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Chapter

15-24

Real World

Azure cloud experienced outages that, in some cases, lasted up to 16 hours The outages occurred in cloud data centers in Chicago, San Antonio, and Dublin, Ireland After investigation, Microsoft determined the outage was triggered by a security system bug related to leap day itself The system sets

expiration dates for security certificates in the virtual machines

that run software for customers Those security certificates, by

default, expire one year later The system tried to set the security date to February 29, 2013, a nonexistent date (since 2013 is not a leap year) This was the initial cause of the crash that Microsoft had to quickly fix.

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Chapter

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Chapter

15-26 SO 6 Implementation issues of ERP systems

Implementation of ERP Systems

Important factors and issues to considers when implementing

an ERP system

1 Hiring a consulting firm

2 The best fit ERP system

3 Which modules to implement

4 Best of breed, verses ERP

modules

5 Business process

reengineering

6 Customization of ERP system

7 Costs of hardware and software

8 Testing the ERP system

9 Data conversion

10 Training of employees

11 Method of conversion, or “go

 Location-Wise

 Modular

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15-27 SO 6 Implementation issues of ERP systems

Implementation of ERP Systems

Concept Check

Which of the following ERP approaches accomplishes the ERP implementation beginning with one department?

d the location-wise implementation method

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15-28

Benefits and Risks of ERP Systems

Benefits of ERP Systems

1.Interactive nature of the modules

2.Real-time nature of processing

3.“Best Practices” nature of the processes

4.Single database enhances sharing of information

5.Capability to analyze large amounts of data

6.Capability to enhance e-commerce and e-business

7.Capability to interact in real-time

8.ERP systems are scalable

SO 7 The benefits and risks of ERP systems

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Benefits and Risks of ERP Systems

Risks of ERP Systems

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ERP Systems and the Sarbanes-Oxley Act

SO 8 ERP systems and the Sarbanes–Oxley Act

ERP systems

Provide feedback information to management regarding internal control Steps the company must accomplish:

►Establish and maintain a list of incompatible duties

►Tracking each employee’s ID and password

►Used to properly segregate duties

►Can incorporate a matrix of tasks that are incompatible

►Allows real-time monitoring and reporting of exceptions

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ERP Systems and the Sarbanes-Oxley Act

SO 8 ERP systems and the Sarbanes–Oxley Act

Exhibit 15-5

Examples of Accounts Payable Internal Control Reports

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15-32

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