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Homework answers / question archive / Harvard University AUDIT 111 Chapter 11-Enterprise Resource Planning Systems TRUE/FALSE 1)The primary goal of installing an ERP system is reducing system maintenance costs

Harvard University AUDIT 111 Chapter 11-Enterprise Resource Planning Systems TRUE/FALSE 1)The primary goal of installing an ERP system is reducing system maintenance costs

Business

Harvard University

AUDIT 111

Chapter 11-Enterprise Resource Planning Systems

TRUE/FALSE

1)The primary goal of installing an ERP system is reducing system maintenance costs.

 

                                          

 

  1. The recommended data architecture for an ERP includes separate operational and data warehouse databases.

 

                                          

 

  1. A closed database architecture shares data easily.

 

                                          

 

  1. ERP systems support a smooth and seamless flow of information across organizations.

 

                                          

 

  1. OLAP stands for on-line application processing.

 

                                          

 

  1. The primary goal of installing an ERP system is achieving business process reengi- neering to improve customer service, reduce production time, increase productivity, and improve decision-making.

 

                                          

 

  1. Day-to-day transactions are stored in the operational database.

 

                                          

 

  1. Data mining typically focuses on the operational databases.

 

                                          

 

  1. Companies are more likely to modify an ERP to accommodate the company than to modify company processes to accommodate the ERP.

 

                                          

 

  1. If a chosen ERP cannot handle a specific company process bolt-on software may be available.

 

                                          

 

  1. Core applications are also called OLAP.                 
  2. The client/server model is a form of network technology in which user computers, called clients, access ERP programs and data via a host computer called a server.

 

                                          

 

  1. A data warehouse is a relational or multi-dimensional database that may require hundreds of gigabytes of storage.

 

                                          

 

  1. Drill-down capability is an OLAP feature of data mining tools.

 

                                          

 

  1. Supply-chain management software is a type of program that supports efforts relative to moving goods from the raw material stage to the customer.

 

                                          

 

  1. In two-tier architecture, the database and application functions are separated.

 

                                          

 

  1. Slicing and dicing permits the disaggregation of data to reveal underlying details.

 

                                          

 

  1. Data entered into the data warehouse must be normalized.

 

                                          

 

  1. OLAP includes decision support, modeling, information retrieval, and what-if analysis.

 

                                          

 

  1. Efficient supply-chain management provides firms with a competitive advantage.

 

                                          

 

  1. The big-bang approach involves converting from old legacy systems to the new ERP in one implementation step.

 

                                          

 

  1. In a two-tier architecture approach is used primarily for wide area network (WAN) applications.

 

                                          

 

  1. Data cleansing is a step performed by external auditors to identify and repairing invalid data prior to the audit.

 

                                          

 

  1. Organizations using ERP systems employ an internal control tool called a role.

 

                                          

 

  1. In spite of the high technology employed in ERP systems, critical business controls such as a three way match always performed manually.

 

                                          

 

  1. The role model assigns specific access privileges directly to individuals.         
  2. An access control list specifies the user-ID, the resources available to the user, and the level of permission granted.

 

                                          

 

  1. RBAC assigns access permissions to the role an individual plays in the organization rather than directly to the individual.

 

                                          

 

  1. A problem with RBAC is that managers tend to create unnecessary roles              

 

  1. The implementation of an ERP creates an environment with a single point of failure, which places the organization at risk.

 

                                          

 

 

 

 

 

 

 

 

 

 

 

MULTIPLE CHOICE

 

  1. Goals of ERP include all of the following except

a.

improved customer service

b.

improvements of legacy systems

c.

reduced production time

d.

increased production

                                          

 

  1. Core applications are

a.

sales and distribution

b.

business planning

c.

shop floor control and logistics

d.

all of the above

                                          

 

  1. Data warehousing processes does not include

a.

modeling data

b.

condensing data

c.

extracting data

d.

transforming data

                                          

 

  1. Which of the following is usually not part of an ERP’s core applications?

a.

OLTP applications

b.

sales and distribution applications

c.

business planning applications

d.

OLAP applications

                                          

 

  1. Which of the following is usually not part of an ERP’s OLAP applications?

a.

logistics

b.

decision support systems

c.

ad hoc analysis

d.

what-if analysis

                                          

 

  1. Which of the following statements is least likely to be true about a data warehouse?

a.

It is constructed for quick searching and ad hoc queries.

b.

It was an original part of all ERP systems.

c.

It contains data that are normally extracted periodically from the operating databases.

d.

It may be deployed by organizations that have not implemented an ERP.

                                          

 

 

 

 

 

 

  1. Which of the following statements is not true?

a.

In a typical two-tier client server system, the server handles both application and database duties.

b.

Client computers are responsible for presenting data to the user and passing user input back to the server.

c.

In three-tier client server architecture, one tier is for user presentations, one is for database and applications, and the third is for Internet access.

d.

The database and application functions are separate in the three-tier model.

                                          

 

  1. Which statements about data warehousing is not correct?

a.

The data warehouse should be separate from the operational system.

b.

Data cleansing is a process of transforming data into standard form.

c.

Drill-down is a data-mining tool available to users of OLAP.

d.

Normalization is an requirement of databases included in a data warehouse.

                                          

 

  1. Which statement about ERP installation is least accurate?

a.

For the ERP to be successful, process reengineering must occur.

b.

ERP fails because some important business process is not supported.

c.

When a business is diversified, little is gained from ERP installation.

d.

The phased-in approach is more suited to diversified businesses.

                                          

 

  1. Which statement is true?

a.

ERPs are infinitely scalable.

b.

Performance problems usually stem from technical problems, not business process reengineering.

c.

The better ERP can handle any problems an organization can have.

d.

ERP systems can be modified using bolt-on software.

                                          

 

  1. Auditors of ERP systems

a.

need not worry about segregation of duties.

b.

may feel that the data warehouse is too clean and free from errors.

c.

find independent verification easy.

d.

need not worry about system access since the ERP determines it.

                                          

 

  1. Legacy systems are

a.

old manual systems that are still in place.

b.

flat file mainframe systems developed before client-server computing became standard.

c.

stable database systems after debugging.

d.

advanced systems without a data warehouse.

                                          

 

  1. A data mart is

a.

another name for a data warehouse.

b.

a database that provides data to an organization’s customers.

c.

an enterprise resource planning system.

d.

a data warehouse created for a single function or department.

                                          

 

  1. Most ERPs are based on which network model?

a.

peer to peer

b.

client-server

c.

ring topology

d.

bus topology

                                          

 

  1. On-line transaction processing programs

a.

are bolt-on programs used with commercially available ERSs.

b.

are available in two models–two-tier and three-tier.

c.

handle large numbers of relatively simple transactions.

d.

allow users to analyze complex data relationships.

                                          

 

  1. Supply chain management software

a.

is typically under the control of external partners in the chain.

b.

links all of the partners in the chain, including vendors, carriers, third-party firms, and information systems providers.

c.

cannot be integrated into an overall ERP.

d.

none of the above

                                          

 

  1. The setup of a data warehouse includes

a.

modeling the data

b.

extracting data from operational databases

c.

cleansing the data

d.

all of the above

                                          

 

  1. Extracting data for a data warehouse

a.

cannot be done from flat files.

b.

should only involve active files.

c.

requires that the files be out of service.

d.

follows the cleansing of data.

                                          

 

  1. Data cleansing involves all of the following except

a.

filtering out or repairing invalid data

b.

summarizing data for ease of extraction

c.

transforming data into standard business terms

d.

formatting data from legacy systems

                                          

 

  1. Separating the data warehouse from the operations databases occurs for all of the following reasons except

a.

to make the management of the databases more economical

b.

to increase the efficiency of data mining processes

c.

to integrate legacy system data into a form that permits entity-wide analysis

d.

to permit the integration of data from diverse sources

                                          

 

  1. Closed database architecture is

a.

a control technique intended to prevent unauthorized access from trading partners.

b.

a limitation inherent in traditional information systems that prevents data sharing.

c.

a data warehouse control that prevents unclean data from entering the warehouse.

d.

a technique used to restrict access to data marts.

e.

a database structure that many of the leading ERPs use to support OLTP applications.

 

                                          

 

  1. Which of the following is NOT as a risk associated with ERP implementation.?

a.

A drop in firm performance after implementation because the firm looks and works differently than it did while using a legacy system.

b.

Implementing companies have found that staff members, employed by ERP consulting firms, do not have sufficient experience in implementing new systems.

c.

Implementing firms fail to select systems that properly support their business activities.

d.

The selected system does not adequately meet the adopting firm’s economic growth.

e.

ERP’s are too large, complex, and generic for them to be well integrated into most company cultures.

                                          

 

  1. Which statement is LEAST accurate?

a.

Implementing an ERP system has as much to do with changing the way an organization does business than it does with technology.

b.

The big-bang approach to ERP implementation is generally riskier than the phased in approach.

c.

To take full advantage of the ERP process, reengineering will need to occur.

d.

A common reason for ERP failure is that the ERP does not support one or more important business processes of the organization

                                          

 

  1. Auditors of ERP systems

a.

are concerned about segregation of duties just as they would be in traditional systems.

b.

focus on output controls such as independent verification because internal processing controls are known to be correct since best practices are used..

c.

routinely audit data in the data warehouse because it is know to be clean and free from errors.

d.

need not review access levels granted to users since these are determined when the system is configured and never change.

                                          

 

  1. Which statement is most correct?

 

a.

SAP is more suited to service industries than manufacturing clients.

b.

J.D. Edwards’s ERP is designed to accept the best practices modules of other vendors.

c.

Oracle evolved from a human resources system.

d.

PeopleSoft is the world’s leading supplier of software for information management.

e.

SoftBrands provides enterprise software for the hospitality and manufacturing sectors.

                                          

 

  1. Auditors of ERP systems
  1. need not be concerned about segregation of duties because these systems possess strong computer controls.
  2. focus on output controls such as independent verification to reconcile batch totals.
  3. are concerned that managers fail to exercise adequate care in assigning permissions.
  4. do not view the data warehouse as an audit or control issue at all because financial records are not stored there.
  5. need not review access levels granted to users because these are determined when the system is configured and never change.

                                          

 

 

 

 

 

 

 

 

SHORT ANSWER

 

    1. Define ERP.

 

 

 

 

    1. Define the term “core applications” and give some examples.

 

 

 

 

    1. Define OLAP and give some examples.

 

 

 

 

    1. What is “bolt-on” software?

 

 

 

 

    1. What is SCM software?

 

 

 

 

    1. What is a data warehouse?

 

 

 

 

    1. What is the “Big-Bang” approach?

 

 

 

 

    1. Describe the two-tier client server model.

 

 

 

 

    1. What is the client-server model?

 

 

 

 

    1. What is scalability?

 

 

 

 

    1. What is data mining?

 

 

 

 

    1. Why do ERP systems need bolt-on software? Give an example.

 

 

 

 

    1. How can a firm acquire bolt-on software? What are the options?

 

 

 

 

    1. Why does data need to be “cleansed”?

 

 

 

 

    1. What are the basic stages of the data warehousing process?

 

 

 

 

    1. Describe the three-tier client server model.

 

 

 

 

    1. Why must a data warehouse include both detail and summary data?

 

 

 

 

 

    1. How does a data warehouse help the external auditor perform the audit?

 

 

 

 

    1. What is the closed database architecture?

 

 

 

 

    1. What is meant by the OLAP term - consolidation

 

 

 

 

    1. What is meant by the OLAP term - Drill-down?

 

 

 

 

    1. What is meant by the OLAP term - Slicing and dicing?

 

 

 

 

    1. What should management do to assess the potential benefits from implementing an

ERP

 

 

 

 

    1. Internal efficiency is cited as one reasone for separating the data warehouse from the operational database. Explain.

 

 

 

 

 

    1. Why are data in a data warehouse stored in unnormalized tables?

 

 

 

 

    1. What is the purpose of role- based governance software?</eoc-nl>

 

 

 

 

 

 

ESSAY

 

 

 

 

 

  1. How are OLTP and OLAP different? Give examples of their use.

 

 

 

 

 

  1. Why does the data warehouse need to be separate from the operational databases?

 

 

 

 

  1. If an auditor suspected an “unusual” relationship between a purchasing agent and certain suppliers, how could “drill-down” be used to collect data?

 

 

 

 

  1. Why must an organization expect the implementation of an ERP to disrupt operations?

 

 

 

 

 

  1. Scalability has several dimensions. What are they? What do they mean for ERP installation?

 

 

 

 

  1. Distinguish between the two-tier and three-tier client server model. Describe when each would be used?

 

 

 

 

  1. Data in a data warehouse are in a stable state. Explain how this can hamper data mining analysis? What can an organization do to alleviate this problem?

 

ANS:

Typically transaction data are loaded into the warehouse only when the activity on them has been completed–they are stable. Potentially important relationships between entities may, however, be absent from data that are captured in there stable state. For example, information about cancelled sales orders will probably not be reflected among the sales orders that have been shipped and paid for before they are placed in the warehouse. One way to reflect these dynamics is to extract the operations data in “slices of time”. These slices provide snapshots of business activity.

 

 

 

  1. This chapter stressed the importance of data normalization when constructing a relational database. Why then is it important to de-normalize data in a data warehouse?

 

ANS:

Wherever possible, normalized tables pertaining to selected events should be consolidated into de- normalized tables. Because of the vast size of a data warehouse, inefficiency caused by joining normalized data can be very detrimental to the performance of the system. A three-way join between tables in a large data warehouse may take an unacceptably long time to complete and may be unnecessary. Since historical data are static in nature, nothing is gained by constructing normalized tables with dynamic links.

 

 

 

  1. ERP implementations are at risk to extensive cost overuns. Discuss three of the more commonly experienced problems area.

 

ANS:

Training. Training costs are invariably higher than estimated because management focuses primarily on the cost of teaching employees the new software. This is only part of the needed training. Employ- ees also need to learn new procedures, which is often overlooked during the budgeting process.

 

System Testing and Integration. In theory, ERP is a holistic model in which one system drives the entire organization. The reality, however, is that many organizations use their ERP as a backbone system that is attached to legacy systems and other bolt-on systems, which support unique needs of the firm. Integrating these disparate systems with the ERP may involve writing special conversion programs or even modifying the internal code of the ERP. Integration and testing are done on a case- by-case basis; thus, the cost is extremely difficult to estimate in advance.

 

Database Conversion. A new ERP system usually means a new database. Data conversion is the process of transferring data from the legacy system’s flat files to the ERP’s relational database. When the legacy system’s data are reliable, the conversion process may be accomplished through automated procedures. Even under ideal circumstances, however, a high degree of testing and manual reconcilia- tion is necessary to ensure that the transfer was complete and accurate. More often, the data in the legacy system are not reliable (sometimes called dirty). Empty fields and corrupted data values cause conversion problems that demand human intervention and data rekeying. Also, and more importantly, the structure of the legacy data is likely to be incompatible with the reengineered processes of the new system. Depending on the extent of the process reengineering involved, the entire database may need to be converted through manual data entry procedures.

 

 

  1. Explain the risks associated with the creation of unnecessary roles and why it can happen. ANS:

Managers in ERP environments have significant discretion in creating new roles for individuals. This

 

may be done for employees who need access to resources for special and/or one-time projects. Such access granting authority needs to be temper with judgment to prevent the number of roles from multiplying to the point of becoming dysfunctional and thus creating a control risk. Indeed, an oft cited problem in ERP environments is that roles tend to proliferate to a point where their numbers actually exceed the number of employees in the organization. Policies need to be in place to prevent the creation of unnecessary new roles and to ensure that temporary role assignments are deleted when the reason for them terminates.

 

  1. What is the fundamental concept behind the rule of least access.? Explain why this is a potential problem in an ERP environment.

 

ANS:

Access privileges (permissions) should be granted on a need to know basis only. Nevertheless, ERP users tend to accumulate unneeded permissions over time. This is often due to two problems: 1.Managers fail to exercise adequate care in assigning permissions as part of their role granting authority. Since, managers are not always experts in internal controls they may not recognize when excessive permissions are awarded to an individual.

Managers tend to be better at issuing privileges than removing them. As a result, an individual may retain unneeded access privileges from a previous job assignment that creates a segregation of duties violation when combined with a newly assigned role.

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