ENTERPRISE

RESOURCE
PLANNING SYSTEM
AUDITING IN A CIS ENVIRONMENT

PRESENTED BY TICIA TUNGPALAN

 INTRODUCTION
PROBLEM:
Most large and midsized organizations designed
and programmed custom information systems in-
house. This resulted in an array of standalone
systems that were designed to the unique needs of
the users.

TREND:
Information systems is toward implementing
highly integrated, enterprise-oriented
systems.
ENTERPRISE RESOURCE
PLANNING (ERP)
ERP systems are multiple module software
packages that evolved primarily from
traditional manufacturing resource planning
(MRP II) systems.
 To integrate key processes of the

01.
organization such as order entry,
manufacturing, procurement and accounts
payable, payroll, and human resources.

OBJECTIVES To create a single computer system can

ENTERPRISE RESOURCE PLANNING 02. serve the unique needs of each

functional area.

Designing one system that serves

03. everyone is an undertaking of massive

proportions.
 TRADITIONAL ERP
INFORMATION
SYSTEM SYSTEM
Each functional area or ERP combines all of these into a
department has its own single, integrated system that
computer system optimized to

V/S
accesses a single database to
the way it does its daily business. facilitate the sharing of
information and to improve
The lack of effective communications across the
communication between organization.
systems. COMPARISON
ERP systems support a smooth
Systems designed in-house
and seamless flow of information
emerge independently and over
across the organization by
time, they are often constructed
providing a standardized
on different and incompatible
environment.
technology platforms.
 TRADITIONAL
INFORMATION
SYSTEM

ERP SYSTEM
ERP CORE APPLICATIONS
are those applications that operationally support
the day-to-day activities of the business. If these
applications fail, so does the business.

Include, but are not limited to, sales and

distribution, business planning, production
planning, shop floor cont and logistics

Online Transaction Processing (OLTP)

ONLINE ANALYTICAL
PROCESSING (OLAP)
Online analytical processing (OLAP) includes
decision support, modeling, information retrieval,
ad hoc reporting/analysis, and what-if analysis.

Some ERPs support these functions with their own

industry-specific modules that can be added to the
core system. Other ERP vendors have designed
their systems to accept and communicate with
specialized bolt-on packages that third-party
vendors produce.
ONLINE ANALYTICAL
PROCESSING (OLAP)
Business analysis tools are crucial for effectively
using a data warehouse.
 II. ERP SYSTEM
CONFIGURATIONS
SERVER
CONFIGURATIONS
Most ERP systems are based on the client-server
model. Briefly, the client-server model is a form
of network topology in which a user's computer
or terminal (the client) accesses the ERP
programs and data via a host computer called
the server.

Two basic architectures are the two-tier model

and the three-tier model.
 TWO-TIER MODEL
The server handles both application and database duties.
Client computers are responsible for presenting data to
the user and passing user input back to the server.

THREE-TIER MODEL
The database and application functions are separated in the
three-tier model. This architecture is typical of large ERP
systems that use wide area networks (WANs) for connectivity
among the users. Satisfying client requests requires two or
more network connections.
 TWO-TIER MODEL

THREE-TIER
MODEL
Online Transaction Online Analytical
Processing (OLT) Processing (OLAP)
Servers
OLTP applications support OLAP applications support
mission-critical tasks management-critical tasks
through analytical investigation of

V/S
through simple queries of
complex data associations that are
operational databases. captured in data warehouses.

OLTP events consist of large An example of an OLAP

numbers of relatively simple COMPARISON transaction is the aggregation of
sales data by region, product type,
transactions, such as
and sales channel. The OLAP
updating accounting
query may need to access vast
records that are stored in amounts of sales data over a
several related tables. multiyear period to find sales for
each product type within each
region.
DATABASE CONFIGURATION
ERP Systems and Database Tables:
ERP Systems use a huge number of tables in a database.

ERP Implementation Team:

A group of important users from the company and IT experts work
together.

Setting up the system:

To set up the ERP, the team needs to know how the company currently
operates.

Adapting Business processes:

Often, to make the best use of the ERP, the company changes how it
works.
BOLT-ON SOFTWARE
Many organizations have found that ERP
software alone cannot drive all the
processes of the company. These firms
use a variety of bolt-on software that
third-party vendors provide.

The least risky approach is to choose a

bolt-on that is endorsed by the ERP
vendor
III. DATA WAREHOUSING
DATA WAREHOUSING
OVERVIEW
Data warehousing is a rapidly growing IT concern, now
integrated into leading ERP systems.

Data Warehouse: A large relational or multidimensional

database.
Data Mart: Smaller, department-specific versions of data
warehouses.

Once in the data warehouse, this data is accessible through query

and analysis tools for data mining.
DATA WAREHOUSING
PROCESS
Most organizations implement a data warehouse as
part of a strategic IT initiative that involves an ERP
system.

Modeling data for the data warehouse

Extracting data from operational databases
Cleansing extracted data
Transforming data into the warehouse
model
Loading the data into the data warehouse
database
 DATA WAREHOUSING PROCESS
MODELING DATA FOR THE EXTRACTING DATA FROM
DATA WAREHOUSE OPERATIONAL DATABASES
Data attributes are constantly Data extraction is the process of collecting
updated, new attributes are added, data from operational databases, flat files,
and obsolete attributes are deleted. archives, and external data sources.

CLEANSING EXTRACTED DATA TRANSFORMING DATA INTO

THE WAREHOUSE MODEL
Data cleansing involves filtering out
To improve efficiency, data can be
or repairing invalid data prior to
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LOADING THE DATA INTO
THE DATA WAREHOUSE
DATABASE
Most organizations have found that data
warehousing success requires that the data
warehouse be created and maintained separately
from the operational (transaction processing)
databases.

Internal Efficiency
Integration of Legacy Systems
Consolidation of Global Data
PRIMARY REASONS FOR
DATA WAREHOUSING:
Decisions Supported by the Data Warehouse
By making the data warehouse as flexible and
friendly as possible, it becomes accessible by
many end users.

Supporting Supply Chain Decisions from the Data

Warehouse
The primary reason for data warehousing is to
optimize business performance. Many
organizations believe that more strategic
benefit can be gained by sharing data
externally.
IV. RISKS ASSOCIATED WITH
ERP IMPLEMENTATION
BIG BANG METHOD PHASED-IN METHOD
Involves switching from old Involves gradually
systems to the new ERP implementing the ERP
system all at once across system in different parts of
the entire organization. the organization over time.

Advantages:
Unified Transition
V/S
COMPARISON
Advantages:
Lower Risk
Potentially Faster Better Adjustment
Continued Operations
Risks:
High Risk of Failure
Risks:
Initial Disruption
Slower Integration
Resistance to Change
Delayed Benefits
Increased Data Entry
RISKS ASSOCIATED WITH ERP
IMPLEMENTATION
Opposition to Changes in the Business's
01
Culture

02 Choosing the Wrong ERP

03 Goodness of Fit

04 Choosing the Wrong Consultant

05 High Cost and Cost Overruns

- Traning
- System testing and integration
- Database conversion

06 Disruptions to Operations
 V. IMPLICATIONS FOR
INTERNAL CONTROL AND
AUDITING
Transaction Authorization
This structure poses potential problems for transaction
authorization. Controls need to be built into the system to
validate transactions before other modules accept and act upon
them.

Segregation of Duties
Organizations using ERP systems must establish new security,
audit, and control tools to ensure duties are properly
segregated.

Supervision
Supervisors should have more time to manage the shop floor
and, through improved monitoring capability, increase their
span of control.

Accounting Records
OLTP data can be manipulated quickly to produce ledger entries,
accounts receivable and payable summaries, and financial
consolidation for both internal and external users.
Independent Verification
Because ERP systems employ OLTP, traditional, independent
verification controls such as reconciling batch control numbers
serve little purpose.

Access Controls
Access security is one of the most critical control issues in an
ERP environment. The goal of ERP access control is to maintain
data confidentiality, integrity, and availability.

Contingency Planning
The implementation of an ERP creates an environment with a
single point of failure, which places the organization at risk from
equipment failure, sabotage, or natural disaster.

Centralized Organizations - Centralized organizations with highly

integrated business units may need a single global ERP system
that is accessed via the Internet or private lines from around the
world to consolidate data from subsidiary systems.
Autonomous Organizational Units - Do not share common
customers, suppliers, or product lines often choose to install
regional servers.
THANK YOU
FOR YOUR ATTENTION
(ATTENTION?!)