Accounting Information Systems, 1st Edition IT Infrastructure for E-Business Accounting Information Systems, 1st Edition

Study Objectives The overview of an ERP system The history of ERP systems Current ERP system characteristics The modules of an ERP system The market segments of ERP software systems Implementation issues of ERP systems The benefits and risks of ERP systems ERP systems and the Sarbanes–Oxley Act of 2002 1. On the topic, “Challenges Facing Financial Accounting,” what did the AICPA Special Committee on Financial Reporting suggest should be included in future financial statements? Non-financial Measurements (customer satisfaction indexes, backlog information, and reject rates on goods purchases). Forward-looking Information Soft Assets (a company’s know-how, market dominance, marketing setup, well-trained employees, and brand image). Timeliness (no real time financial information)

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: Financials Human resources Procurement and logistics Product development and manufacturing Sales and services Analytics Data in a(n) Operational database Data warehouse SO 1 The overview of an ERP system

Overview of ERP Systems Exhibit 15-1 An ERP System SO 1 The overview of an ERP system

Overview of ERP 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. SO 1 The overview of an ERP system

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. SO 2 The history of ERP systems

Concept Check History of ERP Systems a. File retrieval capability. 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. SO 2 The history of ERP systems

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 SO 3 Current ERP system characteristics

Current ERP System Characteristics ERP spending in 2005 was up 16% over 2004. Some reasons for the increase are: Need to improve customer service through standardizing and combining business processes. Global companies may have separate ERP systems in different countries. Aging ERP systems. Bigger IT budgets in 2005. Many companies needed upgraded systems to comply with Sarbanes–Oxley Act. SO 3 Current ERP system characteristics

Current ERP System Characteristics Exhibit 15-3 Pie Chart of ERP Implementations SO 3 Current ERP system characteristics

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? 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. SO 3 Current ERP system characteristics

ERP Modules The top-selling ERP system for large corporations and organizations is SAP. Exhibit 15-4 SAP® View of ERP Modules SO 4 Current ERP system characteristics

ERP Modules BE 36: Match the ERP modules with their purpose of the related processes. a. Taking customer orders and preparing for the impending revenue and cash collection. SO 4 Current ERP system characteristics

ERP Modules BE 36: Match the ERP modules with their purpose of the related processes. Maintenance of the general ledger and supporting journals and subledgers. SO 4 Current ERP system characteristics

ERP Modules BE 36: Match the ERP modules with their purpose of the related processes. Keeping track of purchasing and movement of goods and materials. SO 4 Current ERP system characteristics

ERP Modules BE 36: Match the ERP modules with their purpose of the related processes. Accounting for personnel and payroll activities. SO 4 Current ERP system characteristics

ERP Modules BE 36: Match the ERP modules with their purpose of the related processes. Data mining and other processes for obtaining feedback and supporting managerial decision making. SO 4 Current ERP system characteristics

ERP Modules BE 36: Match the ERP modules with their purpose of the related processes. Planning and scheduling of conversion activities. SO 4 Current ERP system characteristics

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. SO 5 The market segments of ERP software systems

Market Segments of ERP Systems Tier Two Software Intended for organizations with approximately $25 to $250 million in sales. Popular ERP systems are Axapta, Epicor, MAS 500 ERP, Great Plains ERP, and Macola ERP. Price range between $30,000 and $100,000. SO 5 The market segments of ERP software systems

Market Segments of ERP 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. SO 5 The market segments of ERP software systems

Implementation of ERP Systems Important factors and issues to considers when implementing an ERP system. Hiring a consulting firm The best fit ERP system Which modules to implement Best of breed, verses ERP modules Business process reengineering Customization of ERP system Costs of hardware and software Testing the ERP system Data conversion Training of employees Method of conversion, or “go live” Big Bang Location-Wise Modular 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? a. The pilot method. b. The modular implementation approach. c. The big bang approach. d. The location-wise implementation method. SO 6 Implementation issues of ERP systems

Benefits and Risks of ERP Systems Benefits of ERP Systems Interactive nature of the modules. Real-time nature of processing. “Best Practices” nature of the processes. Single database enhances sharing of information. Capability to analyze large amounts of data. Capability to enhance e-commerce and e-business Capability to interact in real-time. ERP systems are scalable. SO 7 The benefits and risks of ERP systems

Benefits and Risks of ERP Systems Implementation Risks Operation Risks Security Availability Processing integrity Online privacy Confidentiality SO 7 The benefits and risks of ERP systems

ERP Systems and the Sarbanes-Oxley Act Provide feedback information to management regarding internal control. 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. SO 8 ERP systems and the Sarbanes–Oxley Act of 2002

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