6 types of ERP audit a business must undertake for smooth operations.
- October 15, 2020
- Posted by: Team Prudence
- Category: ERP Auditing
ERP solutions provide businesses with an opportunity to ensure the smooth running of the processes of the business. An audit of the ERP is essential as it provides assurance on the strength of the processes that are being used by the business. There are 6 Types of ERP Audits a Business Must Undertake for Smooth Operations, as these audits will make sure that the business operations are processes are running smoothly.
- A business should undertake the reviews and audits with relation to the tasks given below.
- Recognize the objectives of control for processes that are being implemented.
- Assess and identify the risks of potential business as well as financial risks that are there in the processes that are being implemented.
- Design and develop the most efficient and effective ways of controlling and managing these risks
- Carry out an independent analysis of the major business activities, and compare the processes of the organization to the leading practices as well as recommend the improvement of the process.
Guarantee that the ERP controls are effective and appropriate.
Analyze the interfaces that are being fed into ERP from the non-ERP systems (like, including legacy, mobile computing, and web-based applications).
Carry out the tests of audit focusing on internal control and business process. A lot of organizations reengineer processes of business during the implementation of ERP. Review the plans of continuity of business and offer a reasonable guarantee that it has been tested.
An audit is an official investigation of the accounts of an organization, typically by another body, as defined by the Oxford Dictionary. An ERP audit, in this way, is an investigation into the aspects of the ERP system of that organization with a judgment regarding the sufficiency of ERP. The ERP audit tells you about the judgment related to the processes and records telling you if they are adequate.
As we know, ERP is a wide-ranging and large tools set. Many perspectives can define the adequacy that leads to the purpose of the ERP audit. Audits are of many types and there are 6 Types of ERP Audits a Business Must Undertake for Smooth Operations.
A compliance audit is the first from 6 Types of ERP Audits a Business Must Undertake for Smooth Operations and it can be conducted internally in which you evaluate if the documented procedures are being followed and if are there documented procedures for processes being followed by people currently where ever they are essential. Notice a person and then document their behavior and actions. Match the person’s behavior with the procedure that is written which should be followed by the person. If there are differences then it means that the person wants encouragement in order to work in accordance with the manual of procedure.
You will also see that the manual needs a few updates when there is a variance. In an organization, data entry is required by the ERP system for most of the work or wants a person to use ERP in order to make a choice that is optimal. Make sure that the touchpoints that are related to the ERP are taken care of in the procedure of documentation.
Compliance audits can be held externally as well as in the business of medical devices following good manufacturing practices or GMP. Similarly, a business that has connections in Europe must follow general data protection requirements or GDPR. The business data stays in the ERP. The audit may recognize the entire data in the ERP concerned with GDPR. It then assesses if the data protection is adequate or not.
Your objective can be auditing across a process. This is another type from 6 Types of ERP Audits a Business Must Undertake for Smooth Operations. For instance, have a look at the process of the purchase order. There are levels from authority to the authorized spending in your business.
The level one buyer has the authority to make a $2,500 purchase, but your chief executive officer can make a $250,000 purchase. The business having inventory, a lot of purchase orders are with a value that is high will be for purchasing the inventory items. The audit may verify an approved forecast or actual order from a customer serving as a demand prior to the approval of the purchase of inventory.
ERP risk audit
SOX, the act by Sarbanes-Oxley needs businesses to evaluate different types of risks. The system of ERP has transactions of every kind that give in the financial statements of the business. An approach of top-down is suggested by the SOX Act to controls, the audit looks from bottom-up starting from individual transactions to evaluate risks.
ERP audit can be looked at from a system perspective as well. This is another type from 6 Types of ERP Audits a Business Must Undertake for Smooth Operations. It shows, the availability of the right hardware as well as network for supporting the ERP use, users suffering from the slow process because of outdated computers or improper setup, availability of wireless connection in the corners of the company, the actual downtime in relation to cloud or server access as compared to the standards of the business, the appropriateness of the downtime standards.
Security is essential and the ERP audit on the basis of security will find the area that needs improvement. Start by examining the users that have access to the data of the system and the limit that is set. Accounting departments should have financial records. Engineers may have the material bills and part numbers. Other users are able to view the engineering records although they are not able to make any changes.
It can be found that the warehouse clerk has to make updates but this access is only given to the engineering. An easy solution for this is to open access to warehouse clerks with some control to make sure that misbehavior is not allowed. Screen personalization is developed, it is a customization that allows clerks to update the fields needed but only view the other fields.
Nowadays, having access from mobile phones to the data of ERP is essential where the users can use their phones for the performance of their jobs. Mobile access allows them to open the systems of ERP from the outside, possibly bypassing the designed firewall for the protection of the ERP data. You have to answer questions like can the data be copied like supplier list or customer.
A waste audit is another type from 6 Types of ERP Audits a Business Must Undertake for Smooth Operations. The businesses operating on lean thinking will use the audit in order to search for the waste in the ERP.
Taiichi Ohno defined the waste, who is from Toyota First in order to see what waste needs to be eliminated. Each of these wastes is connected to the ERP system. The waste that needs to be managed includes all of these, starting from Overproduction, Waiting, Transporting, unnecessary product inventory, excess motion, and going to defects as well.
All of these are the 6 Types of ERP Audits a Business Must Undertake for Smooth Operations. To ensure the smooth running of the businesses, audits can be conducted. They will make sure that there is nothing problematic going on in the system of ERP.
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