The Impact of Enterprise Resource Planning (ERP) Systems on the Effectiveness of Internal Controls over Financial Reporting

2011 ◽  
Vol 25 (1) ◽  
pp. 129-157 ◽  
Author(s):  
John J. Morris
Keyword(s):  
Financial Reporting ◽  
Enterprise Resource Planning ◽  
Internal Control ◽  
Control Sample ◽  
Resource Planning ◽  
Internal Controls ◽  
Erp Systems ◽  
Individual Account ◽  
Sarbanes Oxley ◽  
The Impact

ABSTRACT: Software vendors that market enterprise resource planning (ERP) systems have taken advantage of the increased focus on internal controls that grew out of the Sarbanes-Oxley (SOX) legislation by emphasizing that a key feature of ERP systems is the use of “built-in” controls that mirror a firm’s infrastructure. They argue that these built-in controls and other features will help firms improve their internal control over financial reporting as required by SOX. This study tests that assertion by examining SOX Section 404 compliance data for a sample of firms that implemented ERP systems between 1994 and 2003. The results suggest that ERP-implementing firms are less likely to report internal control weaknesses (ICW) than a matched control sample of non-ERP-implementing firms. It also finds that this difference exists for both general (entity-wide), and individual (account-level) controls.

Sarbanes-Oxley Compliance, Internal Control, and ERP Systems

2011 ◽  
pp. 208-226
Author(s):  
Pall Rikhardsson ◽  
Peter Best ◽  
Claus Juhl-Christensen
Keyword(s):  
Enterprise Resource Planning ◽  
Internal Control ◽  
Academic Research ◽  
Resource Planning ◽  
Internal Controls ◽  
Erp Systems ◽  
Erp System ◽  
Sarbanes Oxley ◽  
Internal Control System ◽  
The World

The effort to comply with the Sarbanes-Oxley Act (SOX) has focused management attention in companies all over the world on the importance of assessing, developing, and maintaining an effective and efficient internal control system. Enterprise resource planning (ERP) systems are a crucial factor in developing such a system. Despite the attention this has attracted in practice, little academic research has focused on this area. This chapter addresses the question: How are ERP systems implicated in Sarbanes-Oxley compliance? It aims to show how SOX requirements regarding assessment and improvement of internal controls are related to the functionalities of an ERP system both in local and global implementations. It examines a solution (mySAP ERP) offered by one specific vendor (SAP) and what functionalities are relevant to global SOX compliance. Based on this, the chapter discusses likely developments regarding compliance functionalities in future releases of ERP systems.

scholarly journals SOX And ERP Adoption

2011 ◽  
Vol 7 (4) ◽  
Author(s):  
David J. Emerson ◽  
Khondkar E. Karim ◽  
Robert Rutledge
Keyword(s):  
Enterprise Resource Planning ◽  
Resource Planning ◽  
Critical Factors ◽  
Erp Systems ◽  
Advantages And Disadvantages ◽  
Sarbanes Oxley ◽  
The Impact ◽  
The Relationship

The objective of this paper is to examine the relationship between the implementation of the Sarbanes-Oxley (SOX) legislation and Enterprise Resource Planning (ERP) systems, and to investigate the impact that the passage of this legislation has had on the decision for companies to adopt ERP technology.  The legislation itself is discussed, along with an analysis of ERP systems, including their components, their advantages and disadvantages, and the critical factors and crucial components which must be present for the successful deployment of such systems.  This paper explores the contributory effect of SOX on ERP adoption.  The authors concluded that SOX merely accelerated an inevitable process.  The best managers will always find and use the best tools to maximize benefits to their organizations.  The requirements of Sarbanes-Oxley forced companies to rethink their processes and technology, and therefore may have provided the final incentive for companies to commit to ERP.

The Impact of Client and Misstatement Characteristics on the Disposition of Proposed Audit Adjustments

2011 ◽  
Vol 30 (2) ◽  
pp. 103-124 ◽  
Author(s):  
Jennifer Joe ◽  
Arnold Wright, and ◽  
Sally Wright
Keyword(s):  
Financial Reporting ◽  
Internal Controls ◽  
Data Availability ◽  
Audit Firm ◽  
Sarbanes Oxley ◽  
Big 4 ◽  
Time Period ◽  
Confidentiality Agreement ◽  
Financial Scandals ◽  
The Impact

SUMMARY We present evidence on the resolution of proposed audit adjustments during a unique time period, immediately following several U.S. financial scandals and surrounding calls for reforms in auditing and financial reporting, which culminated in the passage of the Sarbanes-Oxley Act (SOX). During this period, auditors and their clients faced increased scrutiny from investors and regulators. In addition, auditors had to contend with changed incentives, a new external regulator (i.e., the PCAOB), and upcoming annual PCAOB inspections. We extend prior studies by considering a broader range of factors potentially impacting the resolution of proposed adjustments, including the effect of client tenure, strength of internal controls, and repeat adjustments. Data on 458 proposed adjustments are obtained from the working papers of a sample of 163 audit engagements conducted during 2002 by a Big 4 firm. We find that 24.2 percent of proposed adjustments were subsequently waived. The results indicate audit adjustments are more likely to be waived for clients with whom the audit firm has had a longer relationship, although the pattern does not reflect favoring such clients. We also find that adjustments are more likely to be waived for repeat adjustments. Data Availability: Due to a confidentiality agreement with the participating audit firm the data are proprietary.

The Impact of Enterprise Resource Planning Systems on Organizational Effectiveness

2011 ◽  
pp. 78-96
Author(s):  
Jonas Hedman ◽  
Andreas Borell
Keyword(s):  
Organizational Effectiveness ◽  
Enterprise Resource Planning ◽  
Open Systems ◽  
Resource Planning ◽  
Organizational Impact ◽  
Competing Values ◽  
Erp Systems ◽  
Enterprise Resource Planning Systems ◽  
Systems Models ◽  
The Impact

Enterprise resource planning (ERP) systems have an organizational impact and are in most cases implemented to improve organizational effectiveness. Shortcomings in current research make it difficult to conclude how an organization may be affected. This paper presents an artifact evaluation of the functionality and perceived benefits of ERP systems. The evaluation is based on the competing values model. The evaluation shows that ERP systems support effectiveness criteria (such as control and productivity) related to internal process and rational goal models. The evaluation also points out weaknesses in ERP systems and especially in areas related to human relations and open systems models. The result of the evaluation is used to discuss the impact of ERP systems on organizations and is presented as a series of hypotheses.

Auditor Attestation under SOX Section 404 and Earnings Informativeness

2012 ◽  
Vol 32 (1) ◽  
pp. 61-84 ◽  
Author(s):  
Lucy Huajing Chen ◽  
Jayanthi Krishnan ◽  
Heibatollah Sami ◽  
Haiyan Zhou
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Control Sample ◽  
Audit Fees ◽  
Test Sample ◽  
Section 404 ◽  
Earnings Informativeness ◽  
Sarbanes Oxley ◽  
Audit Reports ◽  
Section 302

SUMMARY Section 404 of the Sarbanes-Oxley Act requires managers to assess, and their auditors to express an opinion on, the effectiveness of internal controls over financial reporting (ICFR). Policymakers expect the ICFR audits to enhance the credibility of firms' financial statements. Prior research argues that audit characteristics that enhance the credibility of financial reporting are associated with stronger earnings-return associations. We examine whether earnings accompanied by the first-time Section 404 ICFR reports were associated with higher informativeness compared with earnings in the prior year when only financial statement audit reports were available. We conduct our analysis for a test sample of accelerated filers with clean ICFR reports and clean previous Section 302 disclosures. Using a difference-in-differences approach, we compare the change in earnings informativeness for the test sample with that for a control sample of non-accelerated filers. We find that earnings informativeness for companies with clean internal control reports was greater in the Section 404 adoption year than in the previous year, while there was no change in earnings informativeness for the non-accelerated filers. Also, there is no difference in the increase in earnings informativeness across firms with small and large compliance costs (measured by change in audit fees), suggesting that both groups benefited from the Section 404 ICFR audits.

The Impact of Internal Controls and Penalties on Fraud

2010 ◽  
Vol 24 (1) ◽  
pp. 1-21 ◽  
Author(s):  
Roberta Ann Barra
Keyword(s):  
Internal Control ◽  
Internal Controls ◽  
Reliability Engineering ◽  
Ceteris Paribus ◽  
Sarbanes Oxley ◽  
Internal Control System ◽  
Analytical Reliability ◽  
Net Assets ◽  
Managerial Employees ◽  
The Impact

ABSTRACT: Little prior research exists on the parameters of internal control activities. The Sarbanes-Oxley Act of 2002 (SOX 2002) makes identifying the properties of these parameters under various conditions important. In this paper, an analytical/reliability engineering methodology is used to investigate the relative impact of penalties versus other types of internal controls on managerial and non-managerial employees’ propensity to commit fraud. Ceteris paribus, increasing required effort with internal controls and/or increasing employee penalties, increases the minimum amount stolen when a fraud incident occurs; that is, more net assets will be taken per fraud incident with controls than without controls. The findings show that the firm’s least-cost scenario with managerial employees is to enforce maximum penalties. The firm’s least-cost scenario with non-managerial employees is to utilize alternative internal controls while imposing minimum penalties. Further, the effectiveness of separation of duties is dependent on the detective controls in the internal control system.

scholarly journals CONTROLLING IN ERA OF INDUSTRY 4.0: OPPORTUNITIES FOR BUSINESSES IN THE FIELD OF THE INTRODUCTION OF NEW TECHNOLOGIES

2021 ◽  
Vol 16 (2) ◽  
pp. 122-134
Author(s):  
Pavol Zahoran ◽  
Ondrej Zizlavsky
Keyword(s):  
Literature Review ◽  
Enterprise Resource Planning ◽  
Industry 4.0 ◽  
New Technologies ◽  
Resource Planning ◽  
Management Control ◽  
Systematic Research ◽  
Erp Systems ◽  
Great Opportunity ◽  
The Impact

Automation, robotics, Internet of Things and Big Data are currently a big challenge for businesses. However, they can also be a great opportunity. One of the corporate areas where new technologies can be used is controlling. In this research, the issue is narrowed down to the impact of new technologies on Enterprise Resource Planning (ERP) systems of companies, which are a basic tool of controlling in companies. The research analyses the possibilities of integrating elements of Industry 4.0 with ERP systems and the possibility of using data for corporate controlling. For this purpose, a literature review was carried out and gained results were further analysed according to the defined criteria. The outcome of the literature review is an essential current state analysis of the impact of new technologies on corporate ERP systems with regard to the company's controlling processes. This paper serves as a very first step in designing a systematic research study in area of controlling 4.0. Keywords: automation, controlling, Enterprise Resource Planning (ERP), Industry 4.0, management control, management accounting

scholarly journals The impact of perceived accounting benefits on the enterprise resource planning success: The mediating role of effective system use

2020 ◽  
Vol 10 (3) ◽  
Author(s):  
Phan Thi Bao Quyen ◽  
Nguyen Phong Nguyen
Keyword(s):  
Enterprise Resource Planning ◽  
Structural Equation ◽  
Resource Planning ◽  
Erp Systems ◽  
Mediating Role ◽  
System Use ◽  
Effective System ◽  
Enterprise Success ◽  
The Impact

In the past decades, enterprise resource planning (ERP) systems have becomeincreasingly automated, particularly for routine management accounting tasks. However, therehas been little research investigating the accounting benefits of adopting ERP systems. Thisstudy investigates the role of perceived accounting benefits in ERP success. Drawing on Juran’sprinciple of ‘fitness for use,’ this study establishes a framework that captures how perceivedaccounting benefits influence effective system use, which, in turn, enhances enterprise success.Using Partial Least Squares – Structural Equation Modelling (PLS-SEM) with survey datacollected from 120 enterprises in Vietnam that have implemented ERP, our findings providestrong support for the predicted positive effect of perceived accounting benefits on enterprisesuccess, and for the hypothesis that this relationship is fully mediated by effective system use.This study is novel for two reasons. First, it is one of the first attempts to provide empiricalevidence that effective system use and enterprise success are valuable outcomes of accountingbenefits perceived to be gained from the use of ERP systems. Second, it discovers anddemonstrates that effective system use is the most appropriate system-use concept in thepresent enterprise systems-related context, a topic that remains under discussion in theliterature.

scholarly journals The impact of enterprise systems in management decision making

2012 ◽  
Vol 1 (1) ◽  
pp. 68-72
Author(s):  
Muthuvelayutham C ◽  
Sugantha lakshm T
Keyword(s):  
Decision Making ◽  
Enterprise Resource Planning ◽  
Local Level ◽  
Resource Planning ◽  
Management Control ◽  
Point Of View ◽  
Management Decision ◽  
Erp Systems ◽  
Erp System ◽  
The Impact

An Enterprise Resource Planning (ERP) system is composed of a basic transactional system and a management control system. Sammon et al. (2003) describesthese 2 components of ERP systems as the solution to “operational” integration problems and “informational” requirements of managers. Thus, the extreme standardisation of business process inherent in ERP systems creates huge volumes of data without providing a clue for how to exploit it and may therefore not beneficial from a decision-making point of view. In this paper, decision-making theory and models are reviewed, focusing on how an ERP implementation might impact on these constructs. This paper is an analysis about centralisation of decision making in an organisation and its impact on performance at a local level.

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