Test bank accounting information system by turner 15 chapter

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ACCOUNTING INFORMATION SYSTEMS
CONTROLS AND PROCESSES
TURNER / WEICKGENANNT
CHAPTER 15: IT Infrastructure for E-Business
TEST BANK – CHAPTER 15 – TRUE / FALSE
1. The intent of an ERP (enterprise resource planning) system is to provide a single
software application for revenue, expenditures, conversion, and administrative
processes.
2. The intent of an ERP (enterprise resource planning) system is to provide a sales
and inventory software application that will interact with the general ledger
software with its sales and inventory transactions.
3. An enterprise resource planning (ERP) system integrates all business processes
and functions into a single software system using a single database.
4. An enterprise resource planning (ERP) system would update accounts receivable
and inventory when purchased goods are received from a vendor.
5. An enterprise resource planning (ERP) system allows a sales representative to
provide the date that inventory for sale will be received from a vendor to a
customer upon order placement.
6. Manufacturing resource planning software systems are outgrowths of the ERP
concept.
7. ERP applications use modules such as financial, human resources, data
warehouse, and analytics.
8. ERP data is stored in both financial and operational databases.
9. The data warehouse is up dated as transactions are processed.
10. Today’s ERP systems can be traced back to the first generation of materials
requirements planning software.
11. Early MRP applications utilized sales forecasts to compute material requirements
for production.
12. The purpose of MRP II was to integrate manufacturing, engineering, marketing,

finance, and human resources units to run on the same information system.


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13. SAP R/3 had tremendous growth due to the use of closed architecture and clientserver hardware compatibility.
14. Y2K compatibility issues arose because computers kept dates in mm/dd/yy type
formats.
15. MRP II has additional modules including customer relationship management and
supply chain management for enhanced e-commerce transactions.
16. MRP II systems let vendors track customer inventory levels and trigger inventory
shipments when prearranged levels are met.
17. Spending for ERP and ERP II systems has been consistently growing since the
mid 1990s and the Y2K events.
18. The financial module of an ERP such as SAP might contain such components as
financial accounting, management accounting, corporate governance, and
inventory.
19. The production development module of an ERP such as SAP might contain such
components as production planning, manufacturing execution, operations
analysis, and enterprise asset management.
20. ERP systems such as SAP normally batch their financial transactions for
processing due to the large amounts of data.
21. ERP systems such as SAP normally post their financial transactions in real-time
for current information through all of the appropriate modules.
22. Management must examine feedback from the ERP system to assist in the
proper management and control of operations and financial conditions.
23. Supply Chain Management integrates supply and demand management within
and across companies.
24. Processes in supply chain management involve trading processes from a supplier
to a business only.

25. Sales and service is a term for software solutions that help businesses manage
customer relationships in an organized way.
26. CRM is a term for software solutions that help businesses manage customer
relationships in an organized way.

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27. CRM success depends entirely on the implementation of the software package
designed for customer relationship support.
28. Tier one includes software often used by large, multinational corporations.
29. Tier two describes software used by midsize businesses and organizations.
30. Tier one describes software used by midsize businesses and organizations.
31. Tier two includes software often used by large, multinational corporations.
32. Peoplesoft uses the terms “back office” in reference to managerial functions and
“front office” in reference to customer and sales functions.
33. mySAP was the first “pure Internet” architecture, with no programming code
residing on the client computer.
34. The strength of SAP is the human resources aspects of an organization.
35. The strength of Peoplesoft is the human resources aspects of an organization.
36. The best fit software is usually defined by the client’s hardware and intranet
structure.
37. When ERP implementation is started all of the legacy system must be replaced
for proper operation.
38. Best of breed means picking the best ERP software on the market for the
particular type of business or organization.
39. Business process reengineering (BPR) is the purposeful and organized changing
of business processes to make them more efficient.

40. Business process reengineering means tailoring both the business process to IT
and the IT process to the business process for best functionality and processing.
41. Customizing an ERP system is recommended wherever the business has an
existing process to accomplish a goal and that process is not compatible with the
ERP system.
42. Customizing an ERP system should be limited due to cost and upgrading to the
system in the future.

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43. ERP implementation costs are kept to a minimum by retaining the legacy
computer hardware and operating systems.
44. Due to the integration of design, ERP systems do not require extensive testing if
implementation does not entail best of breed or legacy modules.
45. Because the ERP system will cleanse and correct data errors while importing
legacy data into its RDBMS, a minimum of time, effort, and dollars will be spent
on data conversion.
46. Training of employees will be minimal due to BPR and system’s integration.
47. The big bang theory is the easiest to implement since the switch from the legacy
system to the ERP system is done on a single date throughout the organization.
48. The big bang theory of implementation is preferred due to the limited problems
incurred in transition.
49. Modular implementation and pilot implementation are both considered concept of
implementation.
50. Location-wise implementation and pilot implementation are both considered
concept of implementation.
51. The real-time nature of processing decreases the total processing time and

allows more immediate feedback to management.
52. The real-time nature of processing increases the total processing time and
precludes immediate feedback to management.
53. ERP systems are built to interact with the IT systems of trading partners such as
customers and suppliers.
54. ERP systems can grow with the business.
55. ERP implementation regarding IT infrastructure benefits include building business
flexibility for current and future changes
56. The integration of an ERP system compensates for its scope, size, and
complexity to make implementation less risky than most IT systems.

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57. Since the sale of goods in an ERP system may automatically trigger more
production, which in turn would trigger the purchase of raw materials there is a
significant need to ensure that these integrated processes are triggered at the
correct time and in the correct amounts.
58. Since ERP systems are modular the risks of implementation enterprise-wide are
minimized.
59. Within an ERP system unauthorized access to a purchase module could trigger a
related unauthorized payment within accounts payable.
60. Based on each employee’s ID and password, audit trails can be constructed and
reports generated to identify the employees who initiated or conducted specific
transactions or tasks.
61. Due to their level of integration, ERP systems have difficulties in properly
segregating duties.
62. The ERP system can incorporate a matrix of tasks that are compatible.

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ANSWERS TO TEST BANK - CHAPTER 15 - TRUE/FALSE:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.

T
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T
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14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.

T
T
T
F
F
F
F
T
T
T
F

F
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27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.

6

F
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40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.

T
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53.
54.
55.
56.
57.
58.
59.
60.
61.
62.

T
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TEST BANK – CHAPTER 15 – MULTIPLE CHOICE
63. Select the true statement from those provided below.
A. An ERP system is designed to interact with a stand-alone sales and
inventory application to create general ledger information.

B. An ERP system is designed to be a stand-alone software application to
accomplish revenue, expenditures, conversion, and administrative
processes.
C. An ERP system will accomplish e-commerce but relies on other software
applications for the accomplishment of e-business transactions.
D. An ERP system will not collect, process, store, and report the data resulting
from e-business transactions.
64. An ERP system uses:
A. one database for each module associated with the organization – sales,
inventory, human resources, etc.
B. one database for manufacturing, one database for sales, one database for
administrative, and one database for design and research.
C. one database which contains all data items associated with the
organization.
D. relational databases for interactive queries between modules and
departments.
65. An enterprise resource planning (ERP) system would:
A. update both accounts receivable and inventory when purchased goods are
received from a vendor.
B. update both accounts payable and accounts receivable when inventory
purchased from a vendor is received.
C. update both accounts payable and sales when purchased goods are
received from a vendor.
D. update both accounts payable and inventory when purchased goods are
received from a vendor.
66. An enterprise resource planning (ERP) system allows a sales representative to
provide a customer with all of the following information except:
A. is the product in stock?
B. what is the price of the product?
C. what is the cost of the product?

D. when will it be shipped?

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67. MRP
A.
B.
C.
D.

applications are:
management resource programs.
manufacturing resources planning software systems.
management reporting programs.
manufacturing reporting programs.

68. ERP
A.
B.
C.
D.

modules include all except:
financial.
operational database.
sales and services.
product development and manufacturing.

69. Within an ERP program:
A. the operational database contains five to ten years of transaction histories.
B. the data warehouse is updated as daily transactions are recorded.
C. the data warehouse contains five to ten years of transaction histories.
D. the data warehouse information is available to sales personnel for customer
histories.
70. Interfaces between modules of ERP systems would be accepted for all of the
following except:
A. sales and inventory.
B. sales and human resources.
C. sales and accounts receivable.
D. sales and manufacturing.
71. Material requirements planning (MRP) software:
1. calculated raw materials quantities needed for manufacturing.
2. calculated lead times on raw materials orders.
3. calculated material needs on accounts payable data.
A. 1, 2, and 3.
B. 1 and 2 only.
C. 2 and 3 only.
D. 1 and 3 only.
72. The purpose of MRP II was to integrate all of the following into a single database
except:
A. human resources.
B. manufacturing.
C. marketing.
D. finance.

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73. SAP
A.
B.
C.
D.

R/3:
operates
operates
operates
operates

on
on
on
on

a
a
a
a

mainframe environment with closed architecture.
client-server environment with open architecture.
client-server environment with closed architecture.
mainframe environment with open architecture.

74. Y2K compatibility issues arose because:
A. older computer systems recorded dates in mm/dd/yyyy formats and
memory for these was expense.
B. older computer systems recorded dates in mm/dd/yyyy formats and
memory in older systems was unreliable.
C. old computer systems kept dates in mm/dd/yy formats.
D. memory in older systems would fail when challenged with a mm/dd/yy
formatted date.
75. Select the correct statement from those provided below.
A. MRP II allows interaction between suppliers and their customers via the
internet or other electronic means.
B. While MRP II provides automatic inventory reordering, it does not allow
suppliers to see customer inventory levels.
C. MRP II systems preclude e-commerce and e-business transactions due to
internal security measures to protect data.
D. To increase operational response times, MRP II systems utilize operational
databases but not data warehouses.
76. Reasons to upgrade ERP systems since the initial implementation include all of
the following except:
A. Y2K compliance concerns.
B. the need for better customer service.
C. multi-national sites of operation.
D. compliance with the Sarbanes-Oxley Act.
77. The financial module of an ERP such as SAP would include all of the following
components except:
A. inventory.
B. financial accounting.
C. management accounting.
D. corporate governance.

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78. The sales and services module of an ERP such as SAP would include all of the
following components except:
A. sales order management.
B. inventory.
C. professional services delivery.
D. incentive and commissions management.
79. The financials module of an ERP system such as SAP would include all of the
following except:
A. accounts payable.
B. statement of cash flows.
C. accounts receivable.
D. All of the above, A, B, and C, would be in the financials module of an ERP
program such as SAP.
80. Management would use the _____________ module for feedback from the ERP
system to assist in the proper management and control of operations.
A. financials.
B. corporate services.
C. analytics.
D. human capital management.
81. To employ analytical processes on the organization’s data:
A. data mining is performed on the operational database.
B. data is uploaded to the analytics module’s database.
C. data mining is performed on the data warehouse.
D. data is uploaded to the financials module’s database.
82. Supply chain management is:

1. the management and control of all materials.
2. the management and control of all funds related to purchasing.
3. the management of information related to the logistics process.
4. limited to the flow of materials from vendors into the production cycle.
A. 1, 2, 3, and 4 are all correct.
B. 1, 2, and 3 are correct.
C. 1, 2, and 4 are correct.
D. 1, 3, and 4 are correct.

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83. Processes in supply chain management:
1. involve trading processes from a supplier to the business.
2. involve trading processes from the business to a customer.
3. involve trading between the business and other intermediaries.
4. do not include any transactions once raw materials are put into production.
A. 1, 2, 3, and 4 are all correct.
B. 1, 2, and 4 are correct.
C. 1, 2, and 3 are correct.
D. 1, 3, and 4 are correct.
84. The term for software solutions that help businesses manage customer
relationships in an organized way is:
A. sales and service.
B. customer relationship management.
C. corporate services.
D. human capital resources.
85. Critical factors of CRM success include:

A. successful software implementation and effective employee utilization.
B. effective use of the analytics module’s data.
C. the effective use by employees of the sales and services module’s data.
D. All of the above, A, B, and C, are correct.
86. The
A.
B.
C.
D.

two tiers of ERP systems are:
the internal tier and external tier.
the vendor & customer tier and the employee tier.
the large, multinational corporation tier and the midsize business tier.
the acquisitions tier and the sales tier.

87. The ERP program that uses the term “back office” in reference to managerial
functions and “front office” in reference to customer and sales functions is:
A. SAP R/3.
B. Oracle Applications.
C. Peoplesoft.
D. mySAP.
88. The first “pure Internet” architecture, with no programming code residing on the
client computer was:
A. SAP R/3.
B. Oracle Applications.
C. Peoplesoft.
D. mySAP.

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89. ERP
A.
B.
C.
D.

tier two software applications include:
Axapta, Epicor, MAS 500 ERP, Microsoft Dynamics, and Macola ERP.
Axapta, Epicor, MAS 500 ERP, JD Edwards, and Macola ERP.
Axapta, Epicor, MAS 500 ERP, Microsoft Access, and Macola ERP.
Axapta, Epicor, SAP R/1, Microsoft Dynamics, and Macola ERP.

90. Select the true statement from the following:
A. The strength of SAP is its human resources capabilities.
B. The strength of Peoplesoft is its manufacturing capabilities.
C. The strength of SAP is its financial reporting capabilities.
D. The strength of Peoplesoft is its human resources capabilities.
91. ERP
A.
B.
C.
D.

implementation:
must accomplish a full ERP system implementation.
may install only selected modules.

must be done one module at a time.
is a short duration process due to total integration of the software.

92. Best of breed means:
A. picking the best ERP software on the market for the particular type of
business or organization.
B. picking the best individual software applications on the market to
accomplish a particular type of business function.
C. picking the best consulting firm to accomplish implementation of the ERP
software.
D. utilizing the most capable employees within the organization work with the
implementation of the ERP application.
93. The
A.
B.
C.
D.

advantage of “best of the breed” is:
the best functionality of the ERP system as a result of total implementation.
the best functionality of a unique process of the organization.
best cost of implementation of the ERP system.
total integration of the ERP modules

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94. Business process reengineering (BPR):

1. aligns business processes with IT systems to record processes.
2. reengineer the underlying processes to be more effective.
3. improves the efficiency of the underlying process through automation.
4. requires significant investment in IT resources.
5. does not have a mutual enhancement effect with IT.
A. 1, 2, 3, 4, and 5.
B. 1, 3, 4, and 5 only.
C. 1, 2, 3, and 5 only.
D. 1, 3, and 4 only.
95. When computerized technology is introduced into processes, the processes
A. must utilize standardized forms and screens for data entry.
B. can be radically redesigned to take advantage of the speed and efficiency of
computers to improve processing efficiency.
C. data retrieval from the databases will be restricted to upper management
for analysis.
D. Both B and C are correct.
96. Business process reengineering means:
A. configuring the business processes to conform to the functionality of the IT
system.
B. configuring the IT system to the business process for best processing
speed.
C. matching the IT and business processes to achieve the greatest mutual
benefit from each.
D. configuring both IT and business processes to meet the goals of ERP.
97. Business process reengineering means:
A. reconfiguring the ERP system to fit the current methods of the organization.
B. retaining general software applications as legacy systems to reduce training
and implementation costs.
C. modifying business processes to take advantage of the capabilities of the
ERP system.

D. acquiring additional computer networking resources to effectively handle
current business processes.

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98. Customizing an ERP system:
1. will tailor the ERP system to the user.
2. may have a prohibitive cost.
3. may hinder future system upgrades.
4. is recommended wherever possible.
A. 1, 2, 3, and 4.
B. 1, 2, and 4 only.
C. 1, 3, and 4 only.
D. 1, 2, and 3 only.
99. Data conversion will:
1. require an appropriate amount of time.
2. be done as at a minimal cost.
3. import data from many legacy systems into a single RDBMS.
4. require cleansing of errors and configuration inconsistencies.
A. 1, 2, 3, and 4.
B. 1, 2, and 4 only.
C. 1, 3, and 4 only.
D. 1, 2, and 3 only.
100. The big bang theory of ERP is:
A. buy one integrated system to accomplish all business processes.
B. switching from the legacy system to the ERP throughout the organization
on one date.

C. commencing training and data cleansing throughout the organization on
one date.
D. exporting all of the data from the legacy system to the ERP system on one
date for configuration control
101. All of the following are implementation of software systems except:
A. the big bang implementation.
B. location-wise implementation.
C. hardware implementation.
D. modular implementation.
102. When one site is utilized as the pilot approach to ERP it is referred to as:
A. big bang implementation.
B. hardware implementation.
C. location-wise implementation.
D. modular implementation.

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103. The advantages and disadvantages of modular implementation are:
A. full system integration is available but hardware incompatibilities exist.
B. installation and training is minimized but full system integration is not
available.
C. all employees are exposed to some portion of the ERP system but critical
information is still in the legacy system.
D. critical information is still available in the legacy system but technical
support is not readily available for the legacy system.
104. Benefits of an ERP system include all of the following except:
A. the real-time nature of processing increases the total processing time.

B. The interactive nature of the modules allows processes to interact with each
other.
C. ERP systems have evolved from many years of software experience so the
software reflects tried and true practices.
D. There is the capability to analyze large amounts of data in a single
database.
105. ERP system benefits include all except:
A. ERP systems are built to interact with the IT systems of trading partners
such as customers and suppliers.
B. ERP systems are configured upon implementation to exceed any reasonable
business growth in the future.
C. the ERP systems incorporate modules to conduct e-commerce and ebusiness.
D. Analytical tools that enable detailed analysis of the data are incorporated
into ERP systems.
106. Organizational benefits of ERP implementation include all except:
A. retaining long-held work patterns and work focus.
B. facilitating organizational learning.
C. building a common vision.
D. Increased employee morale and satisfaction
107. Factors which adversely affect the implementation of an ERP system do not
include:
A. cost.
B. complexity.
C. size.
D. scope.

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108. With an ERP implementation failure of one module:
A. the rest of the system will operate correctly.
B. the rest of the system can stop or disrupt operations.
C. that one module will automatically revert to the legacy system.
D. will result in the entire system reverting to the legacy system.
109. Due to ERP system integration:
A. online privacy is significantly increased.
B. access to one module may result in inappropriate activities in other
modules.
C. security of the system is protected against unauthorized physical or logical
access.
D. availability is increased due to the modular design.
110. The ERP module that aids in meeting the requirements of the Sarbanes-Oxley
Act is the:
A. analytics module.
B. corporate services module.
C. financials module.
D. human capital management module.
111. With the proper implementation of an ERP system:
A. fraud due to inappropriate transaction recording is eliminated.
B. employee IDs, passwords, and segregated duties aid in internal control
measures.
C. audit trails are not necessary due to ID and password security concepts.
D. All of the above, A, B, and C, are correct answers.

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ANSWERS TO TEST BANK - CHAPTER 15 – MULTIPLE CHOICE:
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.

B
C
D
C
B
B
C
B
B
A

73.
74.
75.
76.
77.
78.

79.
80.
81.
82.

B
C
A
A
A
B
C
C
C
B

83.
84.
85.
86.
87.
88.
89.
90.
91.
92.

17

C

B
A
C
B
C
A
D
B
B

93.
94.
95.
96.
97.
98.
99.
100.
101.
102.

B
D
B
C
C
D
C
B
C

C

103.
104.
105.
106.
107.
108.
109.
110.
111.

B
A
B
A
A
B
B
B
B


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TEXTBOOK – CHAPTER 15 – END OF CHAPTER QUESTIONS
112. Which of the following advantages is least likely to be experienced by a company
implementing an enterprise resource planning (ERP) system?
A. Reduced cost
B. Improved efficiency

C. Broader access to information
D. Reduced errors
113. An ERP system is a software system that provides each of the following except
A. collection, processing, storage, and reporting of transactional data.
B. enhancement of e-commerce and e-business.
C. coordination of multiple business processes.
D. physical controls for the prevention of inventory theft.
114. Which of the following is not a feature of an ERP system’s database?
A. Increased efficiency
B. Increased need for data storage within functional areas
C. Increased customer service capability
D. Increased data sharing across functional areas
115. Manufacturing companies implement ERP systems for the primary purpose of
A. increasing productivity.
B. reducing inventory quantities.
C. sharing information.
D. reducing investments.
116. What company developed the first true ERP systems?
A. Microsoft
B. Peoplesoft
C. SAP
D. IBM
117. In the late 1990s, the Y2K compatibility issue was concerned primarily with
computer systems’
A. file retrieval capability.
B. data storage.
C. human resource comparisons.
D. capital budgeting.

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118. The primary difference between ERP and ERP II systems is that ERP II may
include
A. Internet EDI.
B. logistics modules.
C. Reporting modules.
D. a data warehouse.
119. 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
120. Supply chain management (SCM) is a critical business activity that connects a
company more closely with its
A. customers.
B. suppliers.
C. subsidiaries.
D. customers and suppliers.
121. The
A.
B.
C.
D.

type of ERP system used by large, multinational corporations is known as
big bang implementation.

modular implementation.
Tier one software.
Tier two software.

122. Which of the following ERP approaches accomplishes the ERP implementation
beginning with one department?
A. the pilot method
B. the modular implementation approach
C. the big bang approach
D. the location-wise implementation method
123. Which of the following statements best describes the risks of ERP systems?
A. The risks of implementing and operating ERP systems are nearly identical to
the risks of implementing and operating IT systems.
B. The risks of operating and implementing ERP systems are greater than the
risks of implementing and operating IT systems, due to the scope, size, and
complexity of ERP systems.
C. The risks of implementing ERP systems are greater than the risks of
implementing IT systems, but the operating risks are nearly identical.
D. The risks of operating ERP systems are greater than the risks of operating
IT systems, but the implementation risks are nearly identical.

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ANSWERS TO TEXTBOOK – CHAPTER 15 – END OF CHAPTER QUESTIONS
112. A
113. D
114. B

115. C
116. B
117. B

118. A
119. C

20

120. D
121. C

122. B
123. A


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TEST BANK – CHAPTER 15 – SHORT ANSWER QUESTIONS
124. Describe how ERP systems enhance efficiency in a business organization.
Answer: ERP systems enhance efficiency by controlling all business processes in one
software system. That is, a single system collects, processes, stores, and reports
data resulting from all sales, purchase, conversion, and administrative processes. In
addition, ERP systems enable e-commerce and e-business, thus further enhancing
efficiencies.
125. Why is real-time processing essential in an ERP system?
Answer: Real-time processing is essential in an ERP system because all employees in
the organization need to use the same information. Since data is stored in a single
database, it is important that the most up-to-date information is available because

of its usefulness in so many areas of the organization.
126. How has ERP increased the responsibilities of customer service representatives?
Answer: Since customer services representatives have access to complete and
timely information through the ERP system, they are able to answer important
questions pertaining to availability of stock, timing of production, purchases,
deliveries, and shipments, as well as historical information about customer orders
and buying habits. The ERP’s ability to integrate company-wide information enables
customer service representatives to deliver better service, thus facilitating a higher
level of customer satisfaction.
127. What is an MRP II system and how is it different than the ERP systems in use
today?
Answer: Manufacturing Resource Planning (MRP II) software systems is focused on
the movement and use of resources needed by a manufacturing company, such as
purchasing, warehousing, and the scheduling of deliveries, production, and shipping.
MRP II systems evolved into ERP systems when the system’s functionality increased
to include processes related to marketing, distribution, human resources, etc.
128. What are the two databases used by ERP systems?
Answer: The ERP system often utilizes two different databases. These two
databases are the operational database and the data warehouse. The operational
database contains the data necessary to conduct day-to-day operations and produce
management reports. It is continually updated as transactions are processed. The
data warehouse contains non-volatile historical information that is used to support
management decision-making.

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129. Differentiate between the “enterprise-wide” and “non-volatile” features of a

company’s data warehouse.
Answer: Data is enterprise-wide when it is pulled from the operational database
(which pertains the operations of the entire organization), and is then maintained in
the data warehouse for many periods. Data is non-volatile because it does not
change rapidly in the same way that operational data changes. Periodically, new
enterprise-wide data from the operational database is uploaded to the data
warehouse, but other than the updating process, the data in a data warehouse does
not change.
130. What was unique about SAP’s first ERP system?
Answer: SAP’s first ERP system was unique in that it integrated all business
processes (not just manufacturing) and that it made data available in real time.
131. Differentiate between the features of SAP’s R/1, R/2, and R/3. What does the “R”
stand for in this name?
Answer: SAP differentiated new versions of its software by coding them as R/1, R/2,
and R/3, where the “R” stands for “real-time processing” and the number relates to
the version. SAP R/1 was SAP’s first release, which integrated all business processes
and made data available in real time. R/2 allowed for interactivity between modules
and added more features (such as order tracking). R/3 used client-server hardware
that allowed the system to run on a variety of computer platforms and allowed for
third-party companies to develop software that will integrate with SAP R/3.
132. How do ERP II systems allow for businesses to improve efficiencies with respect
to sharing information with trading partners?
Answer: ERP II systems allow for businesses to improve efficiencies with respect to
sharing information with trading partners by using EDI, Internet EDI, or extranets to
connect with suppliers and customers. Exhibit 15-2 depicts a view of an ERP II
system.
133. How did the tragic events of September 11, 2001 affect the market for ERP
systems?
Answer: The events of September 11, 2001 caused drastic reductions in sales of
ERP systems, as nearly all companies reduced IT spending. The economy

experienced a downturn and all most businesses were cutting expenses, including IT
expenditures.

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134. What are some of the activities included in an ERP module for supply chain
management?
Answer: Supply chain management (SCM) is the management and control of all
materials, funds, and related information in the logistics process from the acquisition
of raw material to the delivery of finished products to the customer. The supply
chain involves trading processes from a supplier to a business, as well as trading
processes between the business and its customers and other intermediaries. Similar
to internal processes, these trading processes can experience improved efficiency by
using ERP systems to initiate, record, store, and report these processes.
135. What are some of the features of an ERP module for customer relationship
management?
Answer: Customer relationship management (CRM) allows organizations to manage
customer relationships in an organized manner by providing a database of detailed
customer information that management, salespeople, and customer service
representatives can readily access. This database generally includes historical
information regarding customer purchases, which can be used to match customer
needs with products, inform customers of service requirements, and analyze
customer buying behavior.
136. Which company is today’s top-seller of ERP systems in the U.S.?
Answer: SAP is the top-selling tier one manufacturer of ERP systems in the U.S.
(through 2007).
137. Differentiate between Oracle’s “back office” and “front office” modules.

Answer: Back office modules are the ERP modules such as financial, manufacturing,
supply chain, procurement, and human resources applications that typically do not
involve interaction with the customer. The front office modules are for sales,
marketing, service and call center functions that are visible to customers.
138. Which tier one company introduced the first ERP system that was “pure
internet,” requiring no programming code to reside on the client computer?
Answer: Peoplesoft is the tier one company that introduced the first “pure internet”
ERP system that required no programming code to reside on the client computer.
139. Which of the tier one ERP companies is likely to provide the “best fit” for a
manufacturing firm? For a human resources placement company?
Answer: SAP is the tier one ERP company that is likely to provide the “best fit” for a
manufacturing firm because its systems evolved from MRP II systems. For a human
resources placement company, Peoplesoft is likely to be the “best fit” because it
evolved from a human resources software system.

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140. Why is business process reengineering an important aspect of ERP
implementation?
Answer: Business process reengineering (BPR) an important aspect of ERP
implementation because it aligns business processes with the underlying IT systems
used to record processes. In addition, it improves efficiency and effectiveness of
these processes. When technology is introduced intro business processes, BPR and
IT can have a mutually-enhancing relationship: IT capabilities support the business
processes and the business processes can be redesigned to match the capabilities of
the IT system. Therefore, BPR is important because of its role in improving process
efficiencies.

141. Why should customization of an ERP system be limited?
Answer: Customization of an ERP system should be limited because of issues with
cost and upgrading. Any customizations may require changing or writing new
programming code and this can be a very expensive and time-consuming task. The
cost of customization can easily exceed the cost of packaged ERP software. Second,
any customizations cannot be automatically incorporated when the ERP vendor
provides an upgraded version of the ERP software. Therefore, upgrading to the new
version may mean losing any customizations.
142. Differentiate between location-wise and modular implementation approaches to
the conversion to an ERP system.
Answer: In a location-wise implementation of an ERP system, the organization
chooses a specific location or sub-unit of the organization and implements the ERP
system in that location only. This approach can be considered a “pilot” approach in
which the ERP is first carried out in a sub-unit of the larger organization. This means
that any resulting problems will be isolated within the pilot unit so that the entire
organization is not impacted. In a modular implementation, the ERP system is
implemented one module at a time. The implementation team will normally focus on
the most critical module first and complete the implementation of modules in
descending order. This allows the organization to take advantage of the new
features of the module in the ERP system without affecting all processes in the
organization.
143. Which method of conversion to an ERP system is sometimes referred to as a
“pilot” method? Why is this name appropriate?
Answer: The location-wise implementation method is considered a “pilot” approach
because the ERP is first implemented in a single location or sub-unit of the
organization before it is implemented across the entire organization. This allows any
problems to be worked out in an isolated area without impacting the entire
organization. Thus, the changes and resolutions experiences in this pilot area can be
used to guide the subsequent implementations.

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144. How can an ERP system assist a company in its efforts to comply with the
Sarbanes-Oxley Act of 2002?
Answer: ERP systems assist a company in its efforts to comply with the SarbanesOxley Act of 2002 by providing real-time financial information to facilitate the
reporting requirements of the Act. For instance, enhanced financial modules of an
ERP system may provide feedback information to management regarding internal
controls, which is important for complying with the reporting requirements of section
404 of the Act. In addition, ERP systems can enhance internal controls by providing
for the proper segregation of duties and establishment of authority, as well as the
real-time monitoring and reporting of exceptions.

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