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Embedded Audit Modules in ERP Systems Implementation and Functionality

Embedded Audit Modules in ERP Systems Implementation and Functionality. Roger Debreceny Glen Gray Joeson Jun-Jin Ng Kevin Siow-Ping Lee Woon-Foong Yau. Presented at the Fifth Continuous Assurance Symposium Rutgers University, November 2002. In this Presentation.

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Embedded Audit Modules in ERP Systems Implementation and Functionality

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  1. Embedded Audit Modules in ERP SystemsImplementation and Functionality Roger DebrecenyGlen GrayJoeson Jun-Jin NgKevin Siow-Ping LeeWoon-Foong Yau Presented at the Fifth Continuous Assurance SymposiumRutgers University, November 2002

  2. In this Presentation • Background and Research Questions • EAM scenarios • Testing environment • Results • Future research and limitations

  3. ERP Systems • Enterprise Resource Planning Systems are the carrier battle group of the enterpriseinformation systems • Average ERP system costs $11.5mand takes 19 months to implement • Foundation on a single or federatedDBMS

  4. Embedded Audit Modules • “Modules placed at predetermined points to gather information about transactions or events within the system that auditors deem to be material.” Weber (1999) • Implemented in the DBMS environment as triggers or stored procedures • EAMs as compliance-testing or substantive testing tools • Very little evidence of actual usage

  5. Research Questions • What functionality is provided by pre-existing EAMs or other monitoring technology to support appositely designed triggers and stored procedures within ERP systems? • What coverage of transactions is readily provided within the ERP database environment • What are the barriers to adoption of EAMs in the ERP environment?

  6. Methodology • Develop EAM scenarios • Fraud prevention and detection • Develop sample of ERP providers • Medium  large size corporations • Provide scenarios to ERP providers • Code solution • Review in f2f interviews

  7. EAM Scenarios • Nine-step EAM implementation process of Groomer and Murthy (1989) followed • Audit objectives relate to POB’s Forensic Fieldwork Phase • Five test alert scenarios were designed • Red flag • Simulated fraud scenario • Identify triggers or stored procedures • Develop pseudocodes • Pass to ERP supplier for implementation and review

  8. Sampled ERP Suppliers • Frontstep • Scala • Industrial & Financial Solutions-IFS • Intentia • Oracle • SAP

  9. Results-Frontstep • Use Frontstep’s field triggers scripted in PROGRESS • Data from field trigger written to a file • Data analyzed and distributed using SQL & ASP • Also use Cognos’ Decision Stream for data warehouse • Analysis • Limited support • Tough

  10. Results-Scala • Either script in MS VBA or MS Office • Analysis: • No support for EAM • Tough

  11. ResultsIndustrial & Financial Solutions-IFS • IFS uses an object, component approach • EAM can be simulated using combination of Java and SQL • Analysis • Feasible with support for querying, timing and knowledge distribution • Tough

  12. Results-Intentia • Intentia’s Movex ERP product has predefined alerts related to major business cycles • Support for new alerts in script manager • Analysis • Intentia has comprehensive alert system • >100 predefined user-defined alerts • Support for both triggers and stored procedures • Good script manager

  13. Results-Oracle • Provides an Alert Manager • Complete an alert definition form • Alert can include OS command queue or SQL script • Can define actions on alert firing • Analysis • Alert Manager provides most of the required functionality of an EAM

  14. Results-SAP • Require writing of an Advanced Business Application Programming (ABAP) script • Subsequently embedding the script within the database. • Analysis • Require expert knowledge of • ABAP programming • Client’s database structure

  15. Conclusions • Highly variable support for EAMs within surveyed ERP systems • Barriers to adoption • Extensive knowledge set required to program EAM • Barriers to deployment • Lack of demand • Difficulty in defining the conditions for firing EAMs

  16. Future Research Agenda • Relationship of EAMs to wider assurance objectives • More work required on conditions for EAMs • Were scenarios realistic? • Relationship between EAMs and Business Intelligence/Data Warehouse systems? • Demand for EAMs?

  17. Thank You!

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