To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com ACCOUNTING INFORMATION SYSTEMS CONTROLS AND PROCESSES TURNER / WEICKGENANNT CHAPTER 15: IT Infrastructure for E-Business TEST BANK – CHAPTER 15 – TRUE / FALSE The intent of an ERP (enterprise resource planning) system is to provide a single software application for revenue, expenditures, conversion, and administrative processes 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 An enterprise resource planning (ERP) system integrates all business processes and functions into a single software system using a single database An enterprise resource planning (ERP) system would update accounts receivable and inventory when purchased goods are received from a vendor 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 Manufacturing resource planning software systems are outgrowths of the ERP concept ERP applications use modules such as financial, human resources, data warehouse, and analytics ERP data is stored in both financial and operational databases 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 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 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 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 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 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 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 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 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 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 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com ANSWERS TO TEST BANK - CHAPTER 15 - TRUE/FALSE: 10 11 12 13 T F T F T F F F F T T F F 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 T 27 28 29 30 31 32 33 34 35 36 37 38 39 F T T F F F F F T F F F T 40 41 42 43 44 45 46 47 48 49 50 51 52 T F T F F F F F F F T T F 53 54 55 56 57 58 59 60 61 62 T T T F T F T T F T To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 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? To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 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: calculated raw materials quantities needed for manufacturing calculated lead times on raw materials orders calculated material needs on accounts payable data A 1, 2, and B and only C and only D and 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 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 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 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 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: the management and control of all materials the management and control of all funds related to purchasing the management of information related to the logistics process limited to the flow of materials from vendors into the production cycle A 1, 2, 3, and are all correct B 1, 2, and are correct C 1, 2, and are correct D 1, 3, and are correct 10 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 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 21 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 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 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 22 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 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 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 23 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 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 24 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 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 25 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com TEST BANK – CHAPTER 15 – SHORT ESSAY 145 Why was there so much growth in the sales of ERP systems in the late 1990s? Answer: There are two major contributing factors to the rapid growth in sales of ERP software in the late 1990s One factor was the explosive growth of e-commerce and the dot-com boom that occurred during this time period To enable e-commerce and accelerate business processes in order to meet the demands of e-commerce sales, companies needed integrated systems such as ERP A second factor was the valid concern about Y2K compatibility of existing software systems in companies Many companies were rapidly trying to replace legacy software systems in the late 1990s before the year 2000 changeover occurred Many were facing uncertainty as to whether their legacy software would work after 1999 System professionals were concerned that older legacy systems would “blow up” when faced with a date of 2000 or later 146 What are the five most common reasons for increased spending on ERP systems in the early 2000s? Which of these reasons was the impetus for Viper’s ERP implementation in 2003? Answer: Some of the reasons for this increased ERP spending are: a The need to improve customer service through standardizing and combining business processes This necessitates ERP software that can support standardized and combined processes b Global companies that operate in several countries may have separate ERP systems in various countries Many of these companies decide to replace these various ERP systems with one centrally managed ERP system for the entire company c Aging ERP systems that were installed prior to Y2K need replacement to meet competitive demands faced by companies d Bigger IT budgets in 2005 replaced leaner budgets between 2001 and 2004 Companies began increasing overall IT spending, including spending on ERP systems e To enhance compliance with the Sarbanes-Oxley Act Viper Motorcycle Company implemented an ERP system primarily to enhance compliance with the Sarbanes-Oxley Act of 2002 26 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 147 Match the ERP modules on the left with the purpose of the related processes on the right: Financials a Taking customer orders and preparing for the impending revenue and cash collection Human b Maintenance of the general ledger and supporting Resources journals and sub-ledgers Procurement c Keeping track of purchasing and movement of goods and Logistics and materials Manufacturing d Accounting for personnel and payroll activities Sales and e Data mining and other processes for obtaining Services feedback and supporting managerial decision-making Analytics f Planning and scheduling of conversion activities Answer: Financials Human Resources Procurement and Logistics Manufacturing Sales and Services Analytics b Maintenance of the general ledger and supporting journals and sub-ledgers d Accounting for personnel and payroll activities c Keeping track of purchasing and movement of goods and materials f Planning and scheduling of conversion activities a Taking customer orders and preparing for the impending revenue and cash collection e Data mining and other processes for obtaining feedback and supporting managerial decision-making 27 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 148 What potential advantages and disadvantages exist with respect to engaging a consultant for an ERP implementation? Discuss Answer: The primary advantages of hiring a consulting firm include: a Experience The use of consultants may provide for a more effective implementation, as long as it is performed by professionals having experience with similar implementations The experience of a consultant may be translated into savings for the company, particularly with respect to the avoidance of costly and time-consuming mistakes b Efficiency Due to the experience of professional consultants, time savings may be realized in terms of avoidance of unproductive time spent on training, trialand-error, etc c Less strain on employees The company’s human resources may be relieved so they can engage in their normal activities with minimal disruption to the normal routine The most significant disadvantages of hiring a consulting firm include: a Cost Consultants may be expensive, and can significantly increase the cost of the overall ERP implementation b Limited availability Consultants are typically hired to perform a certain function or are retained for a limited period of time The ongoing need for the implementation team to address issues may create problems for the company who used consultants that are no longer accessible 149 What are the primary benefits of an ERP system? What are the primary risks? Answer: The primary benefits of an ERP system are the following: a The interactive nature of the modules that allows processes to interact with each other For example, the ordering and receiving processes can automatically trigger payment processes b The real-time nature of processing that decreases the total processing time and allows more immediate feedback to management c The “best practices” nature of the processes in ERP systems ERP systems have evolved from many years of software experience with various companies and the software reflects tried and true practices d The single database that enhances sharing of information between the business’ functional areas and between processes e The capability to analyze large amounts of data in a single database Analytical tools are incorporated in ERP systems that allow detailed analysis of the data f The capability to enhance e-commerce and e-business The ERP systems of today incorporate modules to fully incorporate e-commerce and e-business g The capability to interact in real-time with trading partners ERP systems are built to interact with the IT systems of trading partners such as customers and suppliers h The capability of ERP systems to be scalable Scalable means the system can grow with the business 28 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com (149 CONT.) The primary risks of an ERP system are the following: a The large size, scope, and complexity of ERP systems cause their implementation to be very costly, time consuming, and potentially disruptive to operations (Implementation risk) b The potential for failure of the system may cause business disruption across the entire enterprise (Operation risk) 150 What are Shang and Seddon’s five dimensions of ERP benefits? Answer: The five dimensions of ERP benefits are: a Operational benefits, including reductions in time and costs, and improvements in productivity, quality, and customer service b Managerial benefits, including improvements in resource management, planning, decision-making, and performance c Strategic benefits, including support for various aspects of business growth d IT infrastructure benefits, including increased flexibility and infrastructure capability, as well as cost reductions e Organizational benefits, including the facilitation of organizational learning, change management, and employee morale 151 Name the AICPA Services Trust Principles’ five operations risks? Why are these risks greater for ERP systems than for other IT systems? Answer: The five areas of operations risks are as follows: a Security The system is protected against unauthorized (physical and logical) access b Availability The system is available for operation and use as committed or agreed c Processing integrity System processing is complete, accurate, timely, and authorized d Online privacy Personal information obtained as a result of e-commerce is collected, used, disclosed, and retained as committed or agreed e Confidentiality Information designated as confidential is protected as committed or agreed These risks are greater for ERP systems than for other IT systems because of its size and complexity Security becomes a greater risk because the processes are integrated, and often automatically triggered in ERP systems Therefore, any unauthorized user can affect more processes than would be true in an older, legacy system For example, unauthorized access to a purchase module in an ERP system could allow an unauthorized user to trigger not only purchase activities, but the related payment within Accounts Payable 29 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Availability risks are also magnified in ERP systems because of the integrated nature of processes The failure of an ERP system has the potential to stop or disrupt all processes across the entire enterprise Processing integrity risks are more significant in ERP systems due to the interconnected nature of an enterprise-wide system Incorrect data generated in a given process can automatically trigger other processes and post flawed data to other processes Processes may be triggered at the wrong time and incorrect data can be spread over several processes and ERP modules It is important to understand that such processing integrity problems are possible in any IT system But they have the potential to be more damaging in an ERP system Online privacy and confidentiality risks are also magnified in ERP systems ERP systems often have sales and customer relationship management modules in an ecommerce mode This means that sales and customer data is exchanged via the Web or EDI In ERP systems these front-office systems of e-commerce and sales are automatically integrated into the back-office systems of an ERP system The backoffice modules are the financials, supply chain management, and human resources modules Therefore, in an ERP system, the e-commerce activity of customers often automatically integrates into the general ledger and related processes This interconnectivity causes more potential areas for private or confidential information to be available 152 Explain how an ERP system can enhance internal controls? Specifically, how can it facilitate the separation of duties? Answer: Since the passage of the Sarbanes-Oxley Act of 2002, ERP systems have been improved to include enhancements to internal controls These enhancements include functions that assist management in complying with sections of the Act by providing feedback information to management regarding internal controls For processes tracked by the ERP software, a report can be generated that identifies which employees are authorized to initiate and conduct processes Based on each employee’s ID and password, audit trails can be constructed and reported that indicate which employees initiated or conducted individual processes This module within the ERP system can map processes to assist management in understanding whether duties are appropriately segregated within the process Segregation of duties is an important part of internal control that can help prevent errors and fraud ERP systems can be used to properly segregate duties The ERP system can incorporate a matrix of tasks that are incompatible duties For each employee ID and password, the system can check the employee’s access to various tasks to insure that no employee can initiate or conduct incompatible tasks The ERP system electronically segregates duties by limiting the types of transactions each employee can perform For example, a single employee should not have system access to initiate a purchase and record it as received In an ERP system in which integrated 30 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com modules often automatically trigger events, recording the receipt can automatically initiate a check for payment Thus, it is important that a single employee not have authorization in the ERP system to initiate a purchase and also record the receipt In addition to the preventative nature of attempting to restrict incompatible duties, an ERP system also allows real-time monitoring and reporting of exceptions As processes and transactions occur that may be exceptions to what was expected, they can be reported to management in real-time Therefore, an ERP system can assist management in monitoring internal control, monitoring errors and problems, and monitoring exceptions to internal controls 31 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com TEST BANK – CHAPTER 15 – PROBLEMS 153 Explain the hardware or standards that were developed during the ARPANET that were an important foundation for the Internet of today There were hardware items or standards developed during the ARPANET time frame These include packet switching, routers, and the TCP/IP protocol Packet switching is the method to send data over a computer network Data is divided into small packets and sent individually Packets may travel different routes and as they arrive, they are reassembled into the original data A router is hardware that serves as a gateway between two or more networks TCP/IP is an acronym for transmission control protocol/Internet protocol It is the protocol used today 154 Describe the ERP’s modular interface that is necessary in a typical manufacturing environment Answer: An ERP system is a multi-module software system that integrates all business processes and functions of the entire organization into a single software system, using a single database Each of the software modules of an ERP system is intended to collect, process, and store data of a functional area of the organization and to integrate with related processes For example, a module may be designed to process purchase transactions and record all data about purchase orders This module must integrate with accounts payable and inventory since the vendor must be paid and inventory increased as the purchased goods arrive Each module automates business activities of a functional area within an organization Information is updated real-time in the ERP database, so that employees in all business units are using the same information, and all information is up-to-date Since the data is stored in a single database, each functional area can easily share information with other areas of the organization 155 Identify and describe the first generation of ERP systems used in the 1970s, and the second generation of ERP systems used in the 1980s Answer: The first generation of ERP software was called Materials Requirements Planning (MRP) software MRP software of the 1970s allowed plant managers to coordinate the planning of production and raw material requirements MRP software determined order size and timing of raw materials based on sales forecasts and factoring in lead times for order and delivery of materials The typical computer hardware of the 1970s that was used to enable an MRP system was mainframe computers, sequential file processing, and electronic data interchange (EDI) The EDI allowed up-to-date information about inventories and status of orders to be processed quickly As mainframe computers improved in speed and power during the 1980s, MRP software evolved into Manufacturing Resource Planning (MRP II) systems MRP II was much more broad and encompassing than MRP software MRP software was intended to provide for the purchase of raw materials to support manufacturing needs The purpose of MRP II 32 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com was to integrate manufacturing, engineering, marketing, and finance units to run on the same information system and to use a single database for these functions As MRP and MRP II systems became more popular in large manufacturing companies, early pioneers of ERP systems were working on a broader concept of information system software Five former IBM systems analysts began work on an early version of ERP software in 1972 These five formed a company that was to become Systems, Applications and Products in Data Processing (SAP) SAP designed the first true ERP system that was called SAP SAP was intended to integrate all business processes, not just manufacturing, and to make data available in real time To the financial accounting system, they added modules for Materials Management, Purchasing, Inventory Management and Invoice Verification SAP release 2, or SAP R/2 was released in 1978 The new version took full advantage of the current mainframe computer technology, allowing for interactivity between modules and additional capabilities like order tracking 156 Compare and contrast the functionality of the Logistics module and Supply Chain Management activities Answer: The logistics function manages all processes related to the purchase and movement of materials and finished goods This module incorporates the purchase processes, as well as the processes and data resulting from the movement inventories It is a subset of the functions included in the supply chain management activities Supply chain management (SCM) activities encompass the planning and management of all sourcing, procurement, conversion, and logistics functions SCM also includes coordination and collaboration with suppliers, intermediaries, third party service providers, and customers 157 Suppose a company is experiencing problems with omitted transactions in the conversion processes: i.e., inventory transactions are not always being recorded as they occur How can an ERP system help to alleviate such a problem? Answer: An ERP system could help alleviate problems with omitted transactions through its internal control enhancements For example, ERP systems allow realtime monitoring and reporting of exceptions As processes and transactions occur that may be exceptions to what is expected (as in the case of omitted transactions), they can be reported to management immediately In addition, the system can identify employees involved with the recording of specific transactions, which may help identify the source of a problem so that it may be corrected quickly 33 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 158 Using an internet search engine, search for the terms “best of breed” + ERP Locate information that addresses the debate/dilemma faced by many companies regarding the decision implementing best of breed technology versus new applications from an ERP vendor Write a brief memo to discuss this issue Answer: Answers to this questions may vary Following is a sample response: The ERP approach treats the customer as an entity like any other entity, such as an invoice or a sales order Most, if not all, ERP modules now have CRM modules that allow you to pull up and manipulate customer data at will The view of the customer may contain summarizations of activities conducted elsewhere in the system that relate to that customer For example, if a customer places an order with your company, a sales person that is looking at that customer in the hopes of penetrating the account more deeply can see that there is already an outstanding order This may trigger him/her to offer an appropriate discount on another product or offer add-on product to the one just sold The ERP approach is, in most cases, the most seamless solution ERP companies like Peoplesoft either developed or acquired CRM modules and integrated them into the larger suite The downside to this approach is that their CRM modules may not have all the functionality you need in areas like marketing and decision analysis This approach may require you to spend money extending their baseline functionality to meet your specific business needs The best of breed approach aims to integrate a feature-rich CRM system, such as advanced functionality in different areas such as customer service, customer support, order entry, and marketing In most cases these systems are traditional client-server applications, but offer extensive Web-enabled features The vendors of these applications often provide out-of-the-box connectors to popular ERP systems to ease the pain of integration The upside to using these systems includes extensive front-office functionality Often you can provide most, if not all, your customer-facing units with the functionality that they need The user interfaces to these systems are often very easy to use, and there are a multitude of vendors providing training, installation, and customization services The integration of systems, however, is always a challenge There’s always some piece of data not included in the integration routines, or some piece of middleware (the software connecting the systems) that breaks This approach will always require you to spend money on integration services, unless you have the staff to it yourself 34 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 159 Using an internet search engine, search for the terms “big bang” + ERP Identify at least one company that represents a success story with regard to this ERP implementation method (other than Marathon, as described in the Real World Example) Also identify at least one company that experienced problems with this approach (other than the city of Tacoma, as described in the Real World Example) Answer: Answers may vary for this question Some sample responses follow: Some companies that have had success with regard to their experiences with big bang implementation of ERP software include the United Nations Development Programme, Hewlitt-Packard, Strategic Petroleum Reserve (63 days ahead of schedule and 4% under budget) , and others Some companies that have experienced problems with the big bang approach to ERP implementation include Nike, Iowa’s Department of Administrative Services, Hershey’s, LTV Steel, Fox Meyer, and others 160 Access the web site at www.big4guy.com and find an article titled “Why Implement an ERP Enterprise Resource System SAP Oracle Briefly describe the reasons for an ERP implementation Discuss whether the points in this article match with concepts in this chapter Answer: This article lists four reasons to implement an ERP system They are: No Support is available for their legacy systems The vendors of such legacy systems, The vendor found the entire product too costly to maintain and support hence has closed shop Most legacy systems operate as separate disparate systems Interconnectivity is minimal This leads to duplication of effort Data entered in one system is required to again re-entered other systems Data accuracy is a big issue with legacy systems Responsibility and accountability for data and processes cannot be fixed on specific individuals To achieve efficiencies and customer satisfaction, it is important to have a system which can support management’s intention of growth To survive in competitive scenarios, it is important that system supports processes and people Yes, these points are also mentioned in the chapter Legacy systems are costly and difficult to support, and they lead to duplication of effort or data In addition, ERP systems can be more accurate because there is not duplication of data and therefore fewer chances there will be conflicts in the data (concurrency of the data is improved) ERP systems allow the company to provide better customer support The early part of this chapter describes how customer queries can be more efficiently handled with an ERP system 35 ... ebook, solutions and test bank, visit http://downloadslide.blogspot.com TEST BANK – CHAPTER 15 – MULTIPLE CHOICE 63 Select the true statement from those provided below A An ERP system is designed... http://downloadslide.blogspot.com 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... slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com TEST BANK – CHAPTER 15 – SHORT ESSAY 145 Why was there so much growth in the sales of ERP systems in the late 1990s?