1. SAP- ERP

2. What is ERP?
An Enterprise Resource Planning system is a packaged business software system that allows a company to:
Automate and integrate the majority of its business processes
Share common data and practices across the entire enterprise
Produce and access information in a real-time environment

3. What is S A P Introductions: Introductions of the lecturers
Let all participants introduce themselves
Name, office
SAP client and version
What do they want from the course
Lecturer: write the participant objectives on a white board for all to see

4. Systems Applications and Products
What is S A P
S A P
Stands for
Systems Applications and Products

5. About SAP S A P Founded in Walldorf, Germany in 1972 ystems,
pplications,
roducts...
Founded in Walldorf, Germany in 1972
SAP AG was founded in 1972 by 4 former IBM employees. The company headquarters are based in Walldorf, a small German town close to Heidelberg, where the university is a continuous source of employees at SAP. Many of the gurus behind this phenomenal system known as R/3 come from this university.
The company name, SAP is a German acronym, but loosely translates in English to Systems, Applications, and Products in data processing. After the introduction of SAP R/3 in 1992, SAP AG has become the world’s leading vendor of standard application software.

6. World Leader in enterprise business software
SAP Facts & Figures
World Leader in enterprise business software
solutions
4th largest independent software supplier in the world
Largest ERP vendor
More than 2,500,000 users in over 50 countries
Over 21,000 R/3 installations worldwide
An average of 25% of revenue invested in R&D
High customer and employee satisfaction
One of the reasons for SAP’s success is that since it is a standard package, it can be configured in multiple areas and adapted to the specific needs of a company. To support those needs, SAP includes a large number of business functions, leaving room for further functionality and enhancements or adaptability to business practice changes. More and more, corporations are deciding to use standard software systems that are highly flexible and configurable and able to support most of their business practices and information needs.
The maturity and solid experience of SAP in solving the information management problems of businesses around the globe has made its R/3 system the clear market leader in the development of standard applications.
SAP is currently ranked fourth among independent software vendors and is making gains with annual growth rates of more than 40 percent in sales and profit and approximately 30 percent in headcount.
With more than 6,000 companies relying on SAP for their most critical business needs, the number of productive users should easily surpass 300,000. SAP AG has become the top European software vendor. It has formed a considerable number of subsidiaries in more than 40 countries; SAP America is the largest one, with corporate headquarters in Wayne, Pennsylvania. It has also established a technology development center in Foster City, Ca, and sales and support offices throughout North America. The company is committed to further expand into new international markets and to gain multinational support. That is one of the reasons SAP has developed a Kanji version of the R/3 system for the Japanese market and a new Mandarin version for the Chinese and other languages.

7. Why SAP is Unique Highly integrated Comprehensive functionality
Complex data structures
Availability of data
Single point of entry
On-line data capture and real-time update
Requires strong application knowledge
Causes personnel and organizational structure changes
Causes business process changes
An additional aspect of the software integration capability is real time. In fact, the R from R/3 originally is meant for real time. When new input is made into the system, the logical application links will concurrently update related modules so that the business can react to immediate information and changes. This type of updating reduces the overhead of manual processing and communication and enables companies to react quickly in the nonstop and complex business world, which makes SAP software systems a very valuable tool for executive planning and decision making.
Comment: add audit reasons here:
1. Common business processes (global)
2. Integrated business processes
3. Centralization
4. Timely

8. Logo and Implementation
SAP Business Partners
Business
Development
Partners
Logo and Implementation
Technology
Platform
Regular exchanges of experience and ideas are a vital element in the long-term partnership SAP is seeking to form with its customers. The company endeavors to strengthen this relationship by organizing conferences, participating in trade fairs and offering an extensive range of training courses. The continual development of its service offering allows it to keep up with the growing requirements of customers.
SAP’s high-quality offering is complemented by a comprehensive partner concept. All major hardware vendors, without exception, are fully engaged to partner with SAP: currently, AT&T, Bull, Compaq, Data General, Digital, Hewlett-Packard, IBM, Pyramid, Sequent, Siemens-Nixdorf, and SUN have supported certified SAP R/3 platforms.
The biggest consulting firms including the Big 6, numerous smaller ones, and most of the hardware vendors’ systems integration departments have built an impressive army of experts around SAP-related business. (Unlike Oracle, PeopleSoft and other software developers, SAP does not provide systems integration consulting services.) Additionally, SAP has a growing group of first-order technological partners including Microsoft, Informix, Oracle, Apple, Next, Adobe, iXOS, and software AG.
SAP is constantly seeking to extend the range of software interfaces available for use with SAP systems.

9. Support & Services User Groups Competence Centers SAP Employees
over 18,330
worldwide
Hotline
( 24 hours a day
7 days a week )
OSS
Online
Service
System
Remote
Support
CCMS
Computing Center
Management System
Early Watch
Logo/Implementation Partners
over 10,000 consultants
trained in SAP worldwide
Training
over 400 different
SAP training courses
SAP is continually expanding the level of its services through the use of future-oriented technology. One of SAP’s main objectives is to ensure that its powerful services are available around the world 24 hours a day for each phase of the R/3 System lifecycle:
Problem-solving services for the quick resolution of system-related problems
Remote support services for error prevention, system optimization, and consulting
Information Services providing current information tailored to customer needs
Customer support services as a central contact point for receiving and answering questions about the R/3 System and R/3 Services
The On-line Service System (OSS) offers a Hot News service, assures fast and easy information retrieval, and makes ordering documents easy
Product design services for integrating development requests in future production functionality
Certification and audit service to ensure a uniform quality standard for services from SAP and its partners
Early Watch service for increased system availability through preventative analyses that assure early recognition and avoidance of problems
SAP supplements its own services with services from partners. The quality of SAP’s services and those of its partners is monitored, certified, and optimized at regular intervals to ensure a consistent high level.

10. Industries Served By SAP
01 Raw Materials, Mining Agriculture
02 Oil and Gas
03 Chemical
04 Pharmaceutical
05 Building Materials, Clay, Glass
06 Building and Heavy Construction
07 Primary Metal, Metal Products, Steel
08 Industrial and Commercial Machinery
09 Automotive
10 Ship, Aerospace & Train Construction
11 Transportation Services, Tourism
12 Electronic/Optic Equip., Common Devices
13 Wood and Paper
14 Furniture
15 Consumer Packaged Goods - Food
16 Consumer Packaged Goods - Non-Food
17 Clothing and Textiles
18 Retail and Wholesale
19 Communication Services, Media
20 Storage, Distribution, Shipping
21 Utilities
22 Financial Services, Banks and Insurance
23 Government, Public Admin. and Services
24 Museums and Associations
25 Healthcare and Hospitals
26 Educational Institutions, Unis, Research
27 Consulting, Software
28 Services
In addition to manufacturing, the R/3 System can be used in a number of other industries. To meet the requirements of specific economic sectors, SAP is developing industry-specific enhancements to the R/3 standard. Industry solutions for banks, insurance companies, publishers, hospitals, retailers, public utilities, the oil industry, and the public sector are either already on the market or are under development.
Banks: risk management, statutory reporting, controlling
Insurance companies: securities, loans and real estate
Publishers: subscription management, advertising management
Hospitals: patient administration and accounting, hospital controlling
Retail: product structure, distribution logistics, point-of-sales systems
Utilities: device management, house connections, meter readings processing, billing
Oil industry: exploration, transport, distribution
Public sector: financial budget planning and management

11. SAP - The Product
Original product was SAP R/2 on the mainframe introduced in 1972
SAP R/3 introduced for smaller platforms in 1992
Developed using a fourth generation proprietary language developed by SAP called ABAP/4
Major SAP versions:
2.2h
3.0d, 3.0e, 3.0f , 3.1g, 3.1h, 3,1i
4.0b, 4.5b, 4.6b, 4.6c, 4.7
5.0, 6.0

12. SAP - Enterprise System

13. SAP - Client/Server Environment
– Software/hardware combination that can make a request for services from a
central repository of resources
• Server
– Software/hardware combination that can provide services to a group of clients in
a controlled environment

14. SAP - Three-Tier SAP Structure
• GUI – Graphical User Interface or Web Interface
• Application server (one or many)
• Database server (one single location)

15. SAP Components
SAP R/3 is comprised of modules categorized in three core functional areas:
Financial
Human Resources
Logistics
Special software packages on top of R/3, targeted to specialized vertical industries:
Industry Solutions (IS)
Special set of modules positioned between the technical and functional areas of the system:
Cross Application (CA) Modules
Workflow (WF)

16. Financial Applications. . . . . . . .
Financial Accounting FI
General Ledger
Accounts Receivable
Accounts Payable
Tax and Financial Reports
Special Purpose Ledger
Legal Consolidations
The SAP Financial Accounting system is a multi-ledger system. Accounts payable, accounts receivable and the general ledger are nevertheless viewed as a single block.
The SAP Financial Accounting system is tightly integrated into the logistical chain which begins with procurement and ends in sales and distribution.
The user can define the chart of accounts. Business transactions are entered and stored on the data base in the form of documents. The FI system supports account allocation and real-time posting for the other applications.
Accounts Receivable and A/P
A/R is closely integrated with the sales component and provides the data required for effective credit management.
A/P records and administers the accounting data for all vendors. It is an integral part of the purchasing system. The relevant postings for deliveries and invoices in the FI component are carried out automatically in response to these transactions.
Both the A/P and A/R components are fully integrated with the G/L. All postings in A/R and A/P are also recorded directly in the appropriate G/L reconciliation account. However the reconciliation flag needs to be set. The G/L accounts posted to depend on the transaction involved (for example, payables, receivables, down payments, bills of exchange). No amounts need be transferred from the subledger accounts to the general ledger before creating the balance sheet. the A/P component supplies the Cash Management and Forecast component with the figures from invoices necessary to optimize liquidity planning.
AA - Asset Accounting
The AA module contains all the necessary functions for accounting for and managing assets. This includes the ability to calculate separate depreciation for external reporting, tax reporting and cost accounting purposes.
Enterprise controlling includes:
Profit Center Accounting
Analyze internal profit and loss for profit centers
Designate regions or products as profit centers
Apply both actual data and plan data to the profit center structure
Financial Applications

17. Financial Applications. . . . . . . .
Controlling CO
Cost Center Accounting
Profit Center Accounting
Product Cost Controlling
Profitability Analysis
Activity Cost Management
Internal Orders
Activity Based Costing
Most of the information from traditional cost center accounting, i.e., the Cost Center Accounting module (CO-CCA), remains critical for effective cost controlling. The Activity-Based Costing module (CO-ABC) is used to enhance the cost center and activity calculations, resulting in a comprehensive, efficient cost accounting system.
Overhead Cost Controlling
Used to plan, allocate, control and monitor overhead costs; assign collected overhead costs to the cost centers where they occurred or to the activity that led to their occurrence; assign indirect overhead to cost objects and compare planned to actual costs
Product Cost Controlling
Used to plan the costs of materials and other cost accounting objects; calculate the costs of goods manufactured and the costs of goods sold for each product unit; establish prices for materials and assign the costs incurred by a company to units within the company, such as products, product groups, or orders
Profitability Analysis
Used to evaluate market segments with respect to the company's profit or contribution margin; classify segments based on products, customers, orders or strategic business units; provide sales, marketing, product management and corporate planning departments with information to support internal accounting and decision-making
Financial Applications

18. Fixed Asset ManagementAM
Depreciation
Property Values
Insurance Policies
Capital Investment Grants
For managing and supervising fixed assets
Is a subsidiary ledger to the GL
Provides detailed information on asset transactions
Consists of:
Traditional Asset Accounting (from acquisition to retirement)
Leased Assets and Assets Under Construction
Information System (a freely definable hierarchical structure called a report tree that allows users to determine which reports are wanted)
In older versions this was a separate sub module that had to be manually reconciled with the GL. From version 4.6 onwards, it is optional to automatically reconcile to GL:
Financial Applications

19. Financial Applications. . . . . . . .
Project System
Project Tracking
Work Breakdown Structure
Budget Management
Cost and Revenue Planning
Networks and Resources PS
PS - Project System
The Project System is a tool for structuring a project so it can be successfully planned, monitored and controlled. It facilitates defining a work breakdown structure, identifying project activities and dependencies, assigning costs and dates, determining the project budget and tracking actual activities.
Financial Applications

20. Sales and DistributionSD
Computer Aided Sales
Quotations
Sales Order Management
Pricing
Delivery
Invoicing
SD - Sales and Distribution
The SD module performs all functions for sales, distribution, transportation, pricing, invoicing and foreign exchange requirements. It automates the administrative work involved from the time a quotation is made through to distribution and invoicing. This improves the capability to deliver products on a timely basis.
Logistics Applications

21. Logistics Applications . . . . . . . .
Materials Management MM
Procurement
Inventory Management
Vendor Evaluation
Invoice Verification
Warehouse Management
MM - Materials Management
The MM module controls various functions related to materials including the purchase and receipt of goods, inventory management and valuation, warehouse management and quality management.
Logistics Applications

22. Logistics Applications . . . . . . . .
Production Planning
Sales & Operations Planning
Demand Management
Material Requirements Planning
Production Activity Control
Capacity Planning PP
PP - Production Planning
The PP module controls various functions related to production planning and processing. It tracks the purchase, storage and transfer of materials and intermediate products. Important PP components are work centers, bills of material and routings.
Logistics Applications

23. Logistics Applications . . . . . . . .
Quality Management
Quality Certificates
Inspection Processing
Planning Tools
Quality Control
Quality Notifications QM
QM - Quality Management
The QM Information System provides information needed for achieving quality products and a high level of productivity, selecting competent vendors and increasing market share. It is a tool for collecting and consolidating data from inspection processes, entering planning data and analyzing and comparing planning and actual data.
Logistics Applications

24. Logistics Applications . . . . . . . .
Plant Maintenance
Plant Maintenance
Equipment and Technical Objects
Preventive Maintenance
Service Management
Maintenance Order Management PM
PM - Plant Maintenance
The PM module controls and analyzes various plant maintenance activities in order to ensure the continued availability of the production plant. This includes the processing of maintenance requests and maintenance orders for parts and equipment. It has the ability to track maintenance history for equipment and to schedule routine maintenance.
Logistics Applications

25. HR Human Resources Human Resources. . . . . . . .
Personnel Administration
Payroll, Benefits
Time Management
Planning and Development
Organization Management HR
HR - Human Resources
The HR module group includes the traditional payroll accounting, personnel administration and management functions. These three functions share data and are highly interrelated. HR also has functions which address time management, travel expense management, applicant data administration and room reservation planning.
The R/3 Human Resources (HR) system provides the tools needed to handle all aspects of human resource management, from personnel planning to recruitment, from personnel and salary administration to payroll and personnel development.
The Personnel Administration (HR-PA) module covers the areas of payroll, time management, employee benefits, employee management, time management, incentive wages and travel expenses.
The Personnel Planning and Development (HR-PD) module covers the areas of personnel development, organizational management, room reservations planning, seminar and convention management and the new area of workforce planning. This new area integrates workforce planning with the R/3 production, project planning and budgeting systems. Workforce planning can be based on real-time data from sales orders and sales forecasting as well as workforce requirements that derive from enterprise-wide resource planning.
The advantages of the Human Resource system include:
Fast and trouble-free processing of human resource data
Date stamping of all records, providing both a history capability as well as the ability to record future events
Support for executing payroll runs in on-line operation
Support for external time collection systems
Generation of internal and external statements
Simple and direct processing of travel expenses
Reduced dependence on the programming department
On-line input validation
Step-by-step modular upgrading
Human Resources

26. IS Industry Solutions Industry Solutions. . . . . . . . Banks
Hospitals
Oil Companies
Publishing Sector
Telecommunications
Retail
Utilities
Others IS
The Industry Solutions packages are targeted at vertical industries. These packages are fully integrated with all other SAP applications
Through this section, the market is increased and share growth is increased
Industry Solutions packages are a set of specific processes (transactions, programs, documentation, screens) that can be installed and will work directly with the SAP applications
Industry Solutions

27. Audit Cycles Revenue Expenditure Inventory Management Fixed Assets
Treasury
Payroll/Personnel
Business Processes
Or: audits specified by your organization
e.g. Cross functional, Operational
Added financial reporting because it is a cycle that should be audited every year.
Discussion here about the types of audits generally actioned in the organizations represented in the class and how this can be mapped to SAP.

28. Management Challenges
SAP Modules
Three Main Functional Categories
Multitude of Modules
Multitude of Sub-Modules
SAP Business Processes
1000+ Processes
Many Audit cycles
Auditors will determine how all these components interrelate in order to audit effectively
Management should have continuous monitoring processes in place
SAP Business Processes:
Within SAP, a common set of business process structures are linked in an integrated manner. These structures can be used without modification. However, to optimize the functionality of SAP, the standard SAP processes can be customized to each client or organization, i.e. unwanted functionality is excluded.
SAP Module Groups:
All SAP Modules are grouped into 5 different module groups. The 3 core module groups are: Financial Accounting, Logistics and Human Resources. In addition, 1 of the other module groups, Cross Applications, cross over all module groups. Another module group, Industry Solutions, deals with industry specific functionality
SAP Modules:
Also sometimes called SAP Applications. Each module is a set of programs designed to perform a specific type of business data processing. Each module consists of various business functions. Examples of each of these modules will be provided in the detailed section of each module.
SAP Components:
Components are the sub-processes of each module. Component functions can be either mandatory or optional. This allows each component to be customized to fit the client’s environment. Some components are dependent on other components (e.g. the Controlling component is dependent on the Financial Component)
Audit processes: Six cycles as defined in the audit approach:
Expenditure, Treasury, Fixed Assets, Revenue, Inventory Management, Payroll and Personnel Development

29. Business/SAP/Audit Process Views
Audit Cycles
SAP Modules
Business
Processes
Application Level -
Client Environment
Model Level - SAP
Process Model
Organizations’ Audit - Business Cycles
Implementation Level - SAP Software Model
The R/3 Process Model is, as the illustration shows, a bridge from the business perspective to the technical implementation perspective of the R/3 System.
Interpretation of this slide:
Audit: (Account Balance reviews as they associate with business processes)
Based on the SAP module components that are implemented at the client, the associated audit account balances can be identified
The account balances are crucial in determining the scope of the financial audit.
The account balances that are audited, are linked to the defined business cycles.
Since we are auditing according to business cycles, the related account balances are associated with the business cycles.
business cycles should be able to be linked to the business processes which are based on the industry
Note that these mappings are complicated and may provide a high level overview only
Also, due to the interrelation of factors such as business object links and data entry issues, the controls over certain business account balances, may not be in the associated SAP module component
Therefore, if the above mapping is done (certainly not a prerequisite to do an audit), it should be for informational purposes only and should be considered an overview only

30. Relationship of Audit to SAP
SAP Module Functional Categories, Modules and Components
Business Cycles Audits and SAP Modules
SAP
Components
Audit
SAP Processes
Modules
Account Balances
(Financial
Accounting)
(A/R)
(Revenue)
The previous slides already demonstrated the relationship between the Audit processes and the SAP processes. However, how do we get from the SAP Processes or SAP Module Groups to knowing what to audit?
Based on the SAP processes as determined at implementation or through changes in the environment, the relevant SAP module groups are identified. Based on the specifications of the organization, only the relevant SAP modules within the SAP module groups and the appropriate module components are implemented.
It is only at the SAP Component level that the exact relationship between SAP and Account Balances is obvious, e.g. Refer to the example of Revenue through A/R - note the example in the slide in brackets) there is a component and an Account Balance called “Accounts Receivable”.

31. Linking Audit Cycles to SAP Modules
Expenditure
Fixed Assets
Inventory
Management
Payroll and
Personnel
Revenue
Treasury
Financial Applications
Logistics Applications
Human Resources
Cross Applications
Industry Solutions
Audit Business Cycles
Basis Component
SAP Module Functional Category
This graph demonstrates a loose relationship between the Audit Business Processes and the SAP Module Groups. However, note that all the Audit Business Processes will impact SAP at the Financial Application level-not shown on the slide.
The Cross Applications and the Industry Solutions Module Groups do not relate to the individual Audit Business Processes. Rather, they cross function over all the business processes. When we go into the module groups in detail, this will become apparent.
The other function that crosses over all Audit Business Processes is the Basis component of SAP.
BOTTOMLINE: When auditing SAP, one should not be concerned so much with which modules or sub-modules they are dealing with. What matters is what functionality is supported by the system and what system functionality we need to audit.

32. BOTTOMLINE: When auditing SAP, one should not be concerned so much with which modules or sub-modules they are dealing with. What matters is what functionality is supported by the system and what system functionality we need to audit.

33. Thank You