WHAT IS AN

ERPS

ERP SYSTEM
CONFIGURATION

DATA
WAREHOUSING

RISKS
ASSOCIATED
WITH ERP
IMPLEMENTATION

IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS

NON-ERP SYSTEMS
ERP SYSTEM
CONFIGURATION
 Decentralization
 Different database per
DATA
WAREHOUSING department are needed
RISKS
 Hand-made error are incurred
ASSOCIATED
WITH ERP
IMPLEMENTATION
 Information for decision-making is
not reliable
IMPLICATIONS
FOR INTERNAL
CONTROL AND  Additional costs are incurred
AUDITING
 WHAT IS AN
ERPS

TRADITIONAL MODEL
ERP SYSTEM
CONFIGURATION  CLOSED DATABASE
ARCHITECTURE
DATA
WAREHOUSING
 Similar to a flat-file approach
 In-house design
RISKS
ASSOCIATED
WITH ERP  Incompatible technology
IMPLEMENTATION
platforms
IMPLICATIONS
FOR INTERNAL  Create special procedures and
CONTROL AND
AUDITING programs
 WHAT IS AN
ERPS

TRADITIONAL MODEL
ERP SYSTEM
CONFIGURATION

 Data remain with the property of the

DATA application, thus distinct and
WAREHOUSING
separate databases exist
RISKS
ASSOCIATED
 High degree of data redundancy
WITH ERP
IMPLEMENTATION  Data entry errors
IMPLICATIONS
FOR INTERNAL  Lack of effective communication
CONTROL AND
AUDITING
 WHAT IS AN
ERPS

TRADITIONAL MODEL
ERP SYSTEM
CONFIGURATION

DATA
WAREHOUSING

RISKS
ASSOCIATED
WITH ERP
IMPLEMENTATION

IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS
ENTERPRISE RESOURCE PLANNING SYSTEM
ERP SYSTEM
CONFIGURATION
 Multiple module software packages
that evolved primarily from traditional
manufacturing resource planning (MRP
DATA
WAREHOUSING
II)
 Supports a smooth and seamless flow
RISKS
ASSOCIATED of information across the organization
WITH ERP
IMPLEMENTATION
by promoting a standardized
environment
IMPLICATIONS
FOR INTERNAL
CONTROL AND
 OBJECTIVE: Integrate key processes
AUDITING of the organization
 WHAT IS AN
ERPS
ENTERPRISE RESOURCE PLANNING SYSTEM
ERP SYSTEM
CONFIGURATION

DATA  Accurate data

WAREHOUSING
 Reliable and faster decision-making
RISKS
ASSOCIATED
WITH ERP
 Lower Operations Cost
IMPLEMENTATION
 Seamless business operations
IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS
ENTERPRISE RESOURCE PLANNING SYSTEM
ERP SYSTEM
CONFIGURATION

DATA
WAREHOUSING

RISKS
ASSOCIATED
WITH ERP
IMPLEMENTATION

IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS
ENTERPRISE RESOURCE PLANNING SYSTEM
ERP SYSTEM
CONFIGURATION

DATA  TWO MAIN ERP APPLICATIONS

WAREHOUSING
1. Core Applications
RISKS
ASSOCIATED
WITH ERP
2. Business Analysis Applications
IMPLEMENTATION

IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS
CORE APPLICATIONS
ERP SYSTEM
CONFIGURATION
ONLINE TRANSACTION PROCESSING
(OLTP)
DATA
WAREHOUSING
 Support day-to-day activities
RISKS
ASSOCIATED
 Mission-critical tasks
WITH ERP
IMPLEMENTATION  Include sales and distribution,
IMPLICATIONS business planning, shop floor
FOR INTERNAL
CONTROL AND
control and logistics modules
AUDITING
 WHAT IS AN
ERPS
BUSINESS ANALYSIS APPLICATIONS
ERP SYSTEM ONLINE ANALYTICAL PROCESSING (OLAP)
CONFIGURATION
 Supports management-critical tasks through
analytical investigation of complex data
DATA captured in data warehouses:
WAREHOUSING
1. CONSOLIDATION: aggregation or roll-up of
RISKS data
ASSOCIATED
WITH ERP 2. DRILL-DOWN: permits disaggregating data to
IMPLEMENTATION
reveal the underlying details that explain a
IMPLICATIONS phenomena
FOR INTERNAL
CONTROL AND 3. SLICING AND DICING: enables user to examine
AUDITING
data from different viewpoints
 WHAT IS AN
ERPS
BUSINESS ANALYSIS APPLICATIONS
ERP SYSTEM
CONFIGURATION

 Decision support tool

DATA
WAREHOUSING
 Real-time information
RISKS
ASSOCIATED
 Timely decisions
WITH ERP
IMPLEMENTATION  Improve performance and
IMPLICATIONS achieve competitive advantage
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS

ERPS CONFIGURATIONS
ERP SYSTEM
CONFIGURATION
Client-server model
 form of network topology in which a
DATA
WAREHOUSING user’s computer or terminal (the
client) accesses the ERP programs
RISKS
ASSOCIATED
and data via a host computer called
WITH ERP
IMPLEMENTATION
the server
IMPLICATIONS A. TWO-TIER MODEL
FOR INTERNAL
CONTROL AND
AUDITING
B. THREE-TIER MODEL
 WHAT IS AN
ERPS

TWO-TIER MODEL
ERP SYSTEM
CONFIGURATION

DATA
WAREHOUSING
 Servers handle both application and
RISKS
database duties
ASSOCIATED
WITH ERP
IMPLEMENTATION
 Local Area Network (LAN)
IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS

TWO-TIER MODEL
ERP SYSTEM
CONFIGURATION

DATA
WAREHOUSING

RISKS
ASSOCIATED
WITH ERP
IMPLEMENTATION

IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS

THREE-TIER MODEL
ERP SYSTEM
CONFIGURATION

DATA
WAREHOUSING
 Database and application functions
are separated
RISKS
ASSOCIATED  Wide Area Networks (WAN)
WITH ERP
IMPLEMENTATION

IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS

THREE-TIER MODEL
ERP SYSTEM
CONFIGURATION

DATA
WAREHOUSING

RISKS
ASSOCIATED
WITH ERP
IMPLEMENTATION

IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS

ERPS CONFIGURATIONS
ERP SYSTEM
CONFIGURATION

DATA
1. Database Configuration
WAREHOUSING
 Selection of database tables in
RISKS the thousands
ASSOCIATED
WITH ERP
IMPLEMENTATION  Setting the switches in the
IMPLICATIONS
system
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS

ERPS CONFIGURATIONS
ERP SYSTEM
CONFIGURATION
2. Bolt-on Software
 Third-party vendors provide specialized
functionality software
DATA
WAREHOUSING
 i.e: Domino’s Pizza
RISKS  Supply Chain Management links vendors,
ASSOCIATED
WITH ERP
carriers, logistics, companies and
IMPLEMENTATION Information Sytem providers
IMPLICATIONS
FOR INTERNAL
 Supply Chain is the set of activities
CONTROL AND associated with moving goods from raw
AUDITING materials stage to the customer
 WHAT IS AN
ERPS

ERP SYSTEM
ERP SYSTEM
CONFIGURATION

DATA
WAREHOUSING

RISKS
ASSOCIATED
WITH ERP
IMPLEMENTATION

IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS

DATA WAREHOUSING
ERP SYSTEM
CONFIGURATION OLAP
 Data Warehouse - size: GB/TB
DATA
WAREHOUSING  Data Mart - size: less than GB
RISKS Process: Operational Data
ASSOCIATED
WITH ERP
IMPLEMENTATION 1. extracting FROM: ERP & legacy
systems
IMPLICATIONS 2. converting
FOR INTERNAL TO: central archives
CONTROL AND
AUDITING 3. standardizing (data warehouse)
 WHAT IS AN
ERPS

DATA WAREHOUSING
ERP SYSTEM
CONFIGURATION
Stages in Data Warehousing:
1. Modeling data for the data warehouse
DATA 2. Extracting data from operational
WAREHOUSING
databases
RISKS 3. Cleansing extracted data
ASSOCIATED
WITH ERP
IMPLEMENTATION 4. Transforming data into the warehouse
model
IMPLICATIONS
FOR INTERNAL
CONTROL AND 5. Loading the data into the data warehouse
AUDITING database
 WHAT IS AN
ERPS
1. MODELING DATA FOR THE DATA
WAREHOUSE
ERP SYSTEM
CONFIGURATION
OPERATIONAL DATA
DATABASE WAREHOUSE
DATA
WAREHOUSING Normalized data Denormalized
data
RISKS
ASSOCIATED
WITH ERP Relationship Relationship
IMPLEMENTATION
changes does not change
IMPLICATIONS
FOR INTERNAL (Relational
CONTROL AND
AUDITING Theory)
 WHAT IS AN
ERPS
2. EXTRACTING DATA FROM OPERATIONAL
DATABASES
ERP SYSTEM
CONFIGURATION

DATA
 Data extraction is the process of collecting
WAREHOUSING data from operational data bases, flat files,
archives, and external data sources.
RISKS
ASSOCIATED  Operational databases need to be out of
WITH ERP
IMPLEMENTATION service when data extraction occurs to
avoid inconsistencies.
IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS
2. EXTRACTING DATA FROM OPERATIONAL
DATABASES
ERP SYSTEM  Stabilized Data
CONFIGURATION
 FOR: nonvolatile / stable data
DATA  transaction data are loaded into the
WAREHOUSING warhouse only when the activity has been
completed
RISKS
ASSOCIATED  Extracting Snapshots
WITH ERP
IMPLEMENTATION
 FOR: potentially important data not
IMPLICATIONS captured in a stable state
FOR INTERNAL
CONTROL AND  One way to reflect these dynamics is to
AUDITING
extract operations data in slices of time
 WHAT IS AN
ERPS
3. CLEANSING EXTRACTED DATA
ERP SYSTEM
CONFIGURATION

 Attributes taken from multiple

DATA systems are transformed into
WAREHOUSING
uniform, standard business terms
RISKS
ASSOCIATED
 Expensive and labor-intensive
WITH ERP
IMPLEMENTATION
activity, but one that is critical in
establishing data integrity in the
IMPLICATIONS
FOR INTERNAL warehouse.
CONTROL AND
AUDITING
 WHAT IS AN
ERPS
4. TRANSFORMING DATA INTO THE
WAREHOUSE MODEL
ERP SYSTEM
CONFIGURATION  Data are transformed into summary
views before being loaded to
improve efficiency.
DATA
WAREHOUSING

RISKS
ASSOCIATED
WITH ERP
IMPLEMENTATION

IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS
4. TRANSFORMING DATA INTO THE
WAREHOUSE MODEL
ERP SYSTEM
CONFIGURATION

DATA
WAREHOUSING

RISKS
ASSOCIATED
WITH ERP
IMPLEMENTATION

IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS
5. LOADING THE DATA INTO THE DATA
WAREHOUSE MODEL
ERP SYSTEM
CONFIGURATION
 Data warehousing success requires
that the data warehouse be created
DATA
WAREHOUSING and maintained separately from the
operational databases.
RISKS
ASSOCIATED
WITH ERP
 Internal Efficiency
IMPLEMENTATION
 Integration of Legacy Systems
IMPLICATIONS
FOR INTERNAL
CONTROL AND
 Consolidation of Global Data
AUDITING
 WHAT IS AN
ERPS
5. LOADING THE DATA INTO THE DATA
WAREHOUSE MODEL
ERP SYSTEM
CONFIGURATION

 Data warehouse is created for

DATA
WAREHOUSING
esoteric needs.
 Drill-down capability - an OLAP
RISKS
ASSOCIATED feature of data mining tools that is
WITH ERP
IMPLEMENTATION useful in data analysis
IMPLICATIONS
FOR INTERNAL
 Drill-down analysis
CONTROL AND
AUDITING
 WHAT IS AN
ERPS
APPLICATION OF DATA MINING
ERP SYSTEM
CONFIGURATION

DATA
WAREHOUSING

RISKS
ASSOCIATED
WITH ERP
IMPLEMENTATION

IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS
RISKS ASSOCIATED WITH ERP IMPLEMENTATION
ERP SYSTEM
CONFIGURATION  Pace of Implementation
 Big Bang – switch operations from
DATA legacy system to ERP in a single event
WAREHOUSING
 Phased-in – independent ERP units
RISKS installed over time, assimilated and
ASSOCIATED
WITH ERP
integrated
IMPLEMENTATION

IMPLICATIONS
FOR INTERNAL  Opposition to Changes In the Business
CONTROL AND
AUDITING Culture
 WHAT IS AN
ERPS
RISKS ASSOCIATED WITH ERP IMPLEMENTATION
ERP SYSTEM
CONFIGURATION  Choosing the wrong ERP
 Goodness of Fit
DATA
WAREHOUSING
 System Scalability Issues
Four Dimensions:
RISKS
ASSOCIATED • Size
WITH ERP
IMPLEMENTATION
• Speed
IMPLICATIONS
FOR INTERNAL • Workload
CONTROL AND
AUDITING • Transaction Cost
 WHAT IS AN
ERPS
RISKS ASSOCIATED WITH ERP IMPLEMENTATION
ERP SYSTEM  Choosing the Wrong Consultant
CONFIGURATION
Before engaging an outside consultant, the management
should:
DATA • Interview the staff proposed for the project and draft a
WAREHOUSING detailed contract specifying which members of the
consulting team will be assigned to each tasks.
RISKS • Establish in writing, how staff changes will be handled
ASSOCIATED
WITH ERP • Conduct a reference checks of the proposed staff
IMPLEMENTATION
members
IMPLICATIONS • Align the consultants interest with those of the
FOR INTERNAL
CONTROL AND
organization
AUDITING
• Set a firm termination date of the consultant
 WHAT IS AN
ERPS
RISKS ASSOCIATED WITH ERP IMPLEMENTATION
ERP SYSTEM
CONFIGURATION
 High Cost and Cost Overruns
Common areas with high costs:
DATA
WAREHOUSING
 Training
RISKS  System Testing and Integration
ASSOCIATED
WITH ERP
IMPLEMENTATION
 Data Conversion
IMPLICATIONS
 Disruptions to Operations
FOR INTERNAL
CONTROL AND  Example: Hershey Foods Corporation
AUDITING
 WHAT IS AN
ERPS
IMPLICATIONS FOR INTERNAL CONTROL AND
AUDITING
ERP SYSTEM
CONFIGURATION
 Transaction Authorization
 Controls are needed to validate
DATA
WAREHOUSING transactions before they are
accepted by other modules.
RISKS
ASSOCIATED
WITH ERP
 ERPs are more dependent on
IMPLEMENTATION programmed controls than on human
IMPLICATIONS intervention.
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS
IMPLICATIONS FOR INTERNAL CONTROL AND
AUDITING
ERP SYSTEM
CONFIGURATION Segregation of Duties
 Manual processes that normally
DATA
WAREHOUSING
require segregation of duties are
often eliminated.
RISKS
ASSOCIATED  Roles: ensure duties are properly
WITH ERP
IMPLEMENTATION segregated.
IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS
IMPLICATIONS FOR INTERNAL CONTROL AND
AUDITING
ERP SYSTEM
CONFIGURATION  Supervision
 Supervisors need to acquire a
DATA
WAREHOUSING
technical and operational
understanding of the new
RISKS system.
ASSOCIATED
WITH ERP
IMPLEMENTATION

IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS
IMPLICATIONS FOR INTERNAL CONTROL AND
AUDITING
ERP SYSTEM
CONFIGURATION  Corrupted or inaccurate data may
be passed from external sources
DATA
and legacy systems.
WAREHOUSING
 Strict data cleansing is an
RISKS important control.
ASSOCIATED
WITH ERP
IMPLEMENTATION

IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS
IMPLICATIONS FOR INTERNAL CONTROL AND
AUDITING
ERP SYSTEM
CONFIGURATION

 Independent Verification
DATA
WAREHOUSING  From individual transaction level
to overall performance level.
RISKS
ASSOCIATED
WITH ERP
 Access Controls
IMPLEMENTATION
 Maintain data confidentiality,
IMPLICATIONS
FOR INTERNAL integrity, and availability.
CONTROL AND
AUDITING
 WHAT IS AN
ERPS
IMPLICATIONS FOR INTERNAL CONTROL AND
AUDITING
ERP SYSTEM
CONFIGURATION

DATA
WAREHOUSING *The ERP systems went away with
the traditional access control
RISKS
ASSOCIATED models, and employed a Role-Based
WITH ERP
IMPLEMENTATION Access Control.
IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING
 WHAT IS AN
ERPS
IMPLICATIONS FOR INTERNAL CONTROL AND
AUDITING
ERP SYSTEM
CONFIGURATION  Role-Based Access Control (RBAC)
 Reduces significant administrative burden.
DATA  Role- a formal technique for grouping
WAREHOUSING
together users according to the system
resources they need to perform their
RISKS
ASSOCIATED
assigned tasks.
WITH ERP
IMPLEMENTATION  More than one individual can be assigned to
a role.
IMPLICATIONS
FOR INTERNAL
CONTROL AND  An individual may be assigned more than
AUDITING one role.
 WHAT IS AN
ERPS
IMPLICATIONS FOR INTERNAL CONTROL AND
AUDITING
ERP SYSTEM
CONFIGURATION
 Internal Control Issues Related to
ERP Roles
DATA
WAREHOUSING  The creation of unnecessary
roles.
RISKS
ASSOCIATED
WITH ERP
 The rule of least access should
IMPLEMENTATION apply to permission assignments.
IMPLICATIONS
FOR INTERNAL  Monitor role creation and
CONTROL AND
AUDITING
permission-granting activities.
 WHAT IS AN
ERPS
IMPLICATIONS FOR INTERNAL CONTROL AND
AUDITING
ERP SYSTEM
CONFIGURATION  Contingency Planning
 Keeping a business going in case
DATA of disaster.
WAREHOUSING
 Redundant backup mode;
RISKS
ASSOCIATED
regional servers.
WITH ERP
IMPLEMENTATION

IMPLICATIONS
FOR INTERNAL
CONTROL AND
AUDITING