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

SECOND EDITION

Chapter
15-1

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


IT Infrastructure for
E-Business
Chapter
15-2


Study
Study Objectives
Objectives
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

Chapter
15-3


Real
Real World
World

Agri-Beef Co. is a privately held, Idaho firm with
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.

Chapter
15-4


Overview
Overview of
of ERP

ERP Systems
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

Data in a(n)

2. Human resources

1. Operational database

3. Procurement and logistics

2. Data warehouse

4. Product development and
manufacturing
5. Sales and services
6. Analytics
Chapter
15-5

SO 1 The overview of an ERP system


Overview
Overview of

of ERP
ERP Systems
Systems

Exhibit 15-1
An ERP System

Chapter
15-6

SO 1 The overview of an ERP system


Overview
Overview of
of ERP
ERP Systems
Systems
Concept Check
Manufacturing companies implement ERP systems for the
primary purpose of
a.

increasing productivity.

b.

reducing inventory quantities.

c.

sharing information.

d.

reducing investments.

Chapter
15-7

SO 1 The overview of an ERP system


History
History of
of ERP
ERP Systems
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.

Chapter
15-8

SO 2 The history of ERP systems


History
History of
of ERP
ERP Systems
Systems
Concept Check
In the late 1990s, the Y2K compatability issue was concerned
primarily with computer systems’
a.

file retrieval capability.

b.

data storage.

c.

human resource comparisons.

d.

capital budgeting.

Chapter
15-9

SO 2 The history of ERP systems


Current
Current ERP
ERP System
System Characteristics
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

Chapter
15-10

SO 3 Current ERP system characteristics


Current
Current ERP
ERP System
System Characteristics
Characteristics
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.
Chapter
15-11

SO 3 Current ERP system characteristics


Viper Motorcycle Company, a
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.

Real
Real World

World

Chapter
15-12


Current
Current ERP
ERP System
System Characteristics
Characteristics
Concept Check
Which of the following is not one of the reasons for increased
spending on ERP systems in recent years?
a.

The need for Sarbanes-Oxley compliance

b.

Globalization and increased competitive pressures

c.

The need for earnings management

d.

The need for customer service enhancements

Chapter
15-13

SO 3 Current ERP system characteristics


ERP
ERP Modules
Modules
The top-selling ERP system for large
corporations and organizations is SAP.

Chapter
15-14

Exhibit 15-4
SAP® View of
ERP Modules

SO 4 Current ERP system characteristics


ERP
ERP Modules
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.

Chapter
15-15

SO 4 Current ERP system characteristics


ERP
ERP Modules
Modules
Illustration: Match the ERP modules
with their purpose of the related
processes.
b. Maintenance of the general
ledger and supporting journals
and subledgers.

Chapter
15-16

SO 4 Current ERP system characteristics


ERP
ERP Modules
Modules
Illustration: Match the ERP modules
with their purpose of the related
processes.

c. Keeping track of purchasing and
movement of goods and
materials.

Chapter
15-17

SO 4 Current ERP system characteristics


ERP
ERP Modules
Modules
Illustration: Match the ERP modules
with their purpose of the related
processes.
d. Accounting for personnel and
payroll activities.

Chapter
15-18

SO 4 Current ERP system characteristics


ERP
ERP Modules
Modules
Illustration: Match the ERP modules
with their purpose of the related

processes.
e. Data mining and other
processes for obtaining
feedback and supporting
managerial decision making.

Chapter
15-19

SO 4 Current ERP system characteristics


ERP
ERP Modules
Modules
Illustration: Match the ERP modules
with their purpose of the related
processes.
f.

Chapter
15-20

Planning and scheduling of
conversion activities.

SO 4 Current ERP system characteristics


Market

Market Segments
Segments of
of ERP
ERP Systems
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.

Chapter
15-21

SO 5 The market segments of ERP software systems


Market
Market Segments
Segments of
of ERP
ERP Systems
Systems
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.

Chapter
15-22

SO 5 The market segments of ERP software systems


SkullCandy, founded in 2003, is a
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.

Real
Real World
World

Chapter
15-23


On leap day, February 29, 2012, Microsoft’s
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.

Real
Real World
World

Chapter
15-24


Market
Market Segments
Segments of
of ERP

ERP Systems
Systems
Concept Check
The type of ERP system used by large, multinational
corporations is known as
a.

big bang implementation.

b.

modular implementation.

c.

Tier one software.

d.

Tier two software.

Chapter
15-25

SO 5 The market segments of ERP software systems