Test Bank For Accounting Information Systems: Controls and Processes, 3rd Edition: Controls

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Controls and Processes, 3rd Edition: Controls and
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 ACCOUNTING INFORMATION SYSTEMS/3e
TURNER / WEICKGENANNT/COPELAND
Test Bank: CHAPTER 6: ERP Systems

NOTE: All new or adjusted questions are in red. New questions are identified by the letter A as part of
the question number; adjusted questions are identified by the letter X as part of the question number.

End of Chapter Questions:

1. Which of the following advantages is least likely to be experienced by a company implementing

an enterprise resource planning (ERP) system?
A. Reduced cost
B. Improved efficiency
C. Broader access to information
D. Reduced errors

2. An ERP system is a software system that provides each of the following EXCEPT:
A. Collection, processing, storage, and reporting of transactional data.
B. Enhancement of e-commerce and e-business.
C. Coordination of multiple business processes.
D. Physical controls for the prevention of inventory theft.

3. Which of the following is NOT a feature of an ERP system’s database?

A. Increased efficiency
B. Increased need for data storage within functional areas
C. Increased customer service capability
D. Increased data sharing across functional areas

4. Manufacturing companies implement ERP systems for the primary purpose of

A. Increasing productivity
B. Reducing inventory quantities
C. Sharing information
D. Reducing investments

5. What company developed the first true ERP systems?

A. Microsoft
B. Peoplesoft
C. SAP
D. IBM

Ch 6 Test bank – 3e Page 1 of 26

6. In the late 1990s, the Y2K compatibility issue was concerned primarily with computer systems’:
A. File retrieval capability
B. Data storage
C. Human resource comparisons
D. Capital budgeting

7. The primary difference between ERP and ERP II systems is that ERP II may include:
A. Internet EDI
B. Logistics modules
C. Reporting modules
D. A data warehouse

8. Which of the following is NOT one of the reasons for increased spending on ERP systems in
recent years?
A. The need for Sarbanes-Oxley compliance
B. Globalization and increased competitive pressures
C. The need for earnings management
D. The need for customer service enhancements

9. Supply chain management (SCM) is a critical business activity that connects a company more
closely with its:
A. Customers
B. Suppliers
C. Subsidiaries
D. Customers and suppliers

10. The type of ERP system used by large, multinational corporations is known as
A. Big bang implementation
B. Modular implementation
C. Tier one software
D. Tier two software

11. Which of the following ERP approaches accomplishes the ERP implementation beginning with
one department?
A. The pilot method
B. The modular implementation approach
C. The big bang approach
D. The location-wise implementation method

Ch 6 Test bank – 3e Page 2 of 26

 12. Which of the following statements best describes the risks of ERP systems?
A. The risks of implementing and operating ERP systems are nearly identical to the risks of
implementing and operating IT systems.
B. The risks of operating and implementing ERP systems are greater than the risks of
implementing and operating IT systems, due to the scope, size, and complexity of ERP
systems.
C. The risks of implementing ERP systems are greater than the risks of implementing IT
systems, but the operating risks are nearly identical.
D. The risks of operating ERP systems are greater than the risks of operating IT systems, but the
implementation risks are nearly identical.

TEST BANK – CHAPTER 15 – MULTIPLE CHOICE

13. 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.

14. 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.

15. Which of the following is used to produce management reports that would be used to oversee
day-to-day operations?
A. Operational Database
B. Data Warehouse
C. Functional Database
D. Organizational Database

16. The _________ contains the data necessary to conduct day-to-day operations and produce
management reports used to oversee day-to-day operations.
A. Data warehouse
B. Data center
C. Operational database
D. Enterprise resource planning system

Ch 6 Test bank – 3e Page 3 of 26

17. The _________ is an integrated collection of enterprise-wide data that ideally should include 5
to 10 years of nonvolatile data.
A. Data warehouse
B. Data center
C. Operational database
D. Enterprise resource planning system

18. 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.

19. 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?

20. MRP applications are:

A. Management resource programs software
B. Manufacturing resources planning software
C. Management reporting programs software
D. Manufacturing reporting programs software

21. ERP modules include all EXCEPT:

A. Financial
B. Operational database
C. Sales and services
D. Product development and manufacturing

22. ERP software operates on a(n) _________ database

A. Operational
B. Warehouse
C. Relational
D. Enterprise

Ch 6 Test bank – 3e Page 4 of 26

23. Data within an ERP system may be stored in a(n):
A. Operational database
B. Relational database
C. Data warehouse
D. Both A & C

24. 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.

25. 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.

26. Material requirements planning (MRP) software:

1. Calculated raw materials quantities needed for manufacturing.
2. Calculated lead times on raw materials orders.
3. Calculated material needs on accounts payable data.

A. 1, 2, and 3
B. 1 and 2 only
C. 2 and 3 only
D. 1 and 3 only

27. 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

28. SAP R/3 operates on a:

A. Mainframe environment with closed architecture.
B. Client-server environment with open architecture.
C. Client-server environment with closed architecture.
D. Mainframe environment with open architecture.

29. Which company developed the first true ERP system?

A. SAP
B. Oracle
C. Hyperion
D. Microsoft
Ch 6 Test bank – 3e Page 5 of 26
30. The systems transition responsible for moving business processes from an internal management
perspective to an interactive, internal, and external perspective is?
A. The evolution of Customer Relationship Management (CRM) into Supply Chain Management
(SCM)
B. The evolution of ERP systems into ERP II systems
C. The evolution of Electronic Data Interchange (EDI) into ERP II systems
D. None of the Above

31. 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.

32. 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.

33. Spending on ERP systems increased or decreased based on several factors. These factors
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

34. Which of the following is NOT one of the reasons for the increased spending on ERP systems
since 2004?
A. Bigger IT budgets replaced leaner budgets as economic conditions improved.
B. Many companies needed upgraded systems to enhance compliance with the Sarbanes-Oxley
Act.
C. Business processes were separated and standardized.
D. ERP has become so important to daily operations that many companies cannot allow their
ERP system to become outdated.

Ch 6 Test bank – 3e Page 6 of 26

35. Over the next few years, spending on ERP systems is expected to:
A. Fall
B. Stay Constant
C. Rise
D. Spending habits are uncertain for the future

36. The financials 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

37. The sales and services module of an ERP such as SAP would include all of the following
components EXCEPT:
A. Sales order management
B. Procurement
C. Professional service delivery
D. Incentive and commissions management

38. The analytics module of an ERP system such as SAP would include all of the following EXCEPT:
A. Financial analysis
B. Strategic enterprise management
C. Project portfolio management
D. Workforce analysis

39. The human capital management module of an ERP such as SAP would include all of the following
components except:
A. Talent management
B. Workforce process management
C. Workforce development
D. Workforce termination management

40. 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

Ch 6 Test bank – 3e Page 7 of 26

41. 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.

42. Supply chain management is:

1. The management and control of all materials.
2. The management and control of all funds related to purchasing.
3. The management of information related to the logistics process.
4. Limited to the flow of materials from vendors into the production cycle.

A. 1, 2, 3, and 4 are all correct.

B. 1, 2, and 3 are correct.
C. 1, 2, and 4 are correct.
D. 1, 3, and 4 are correct.

43. Processes in supply chain management:

1. Involve trading processes from a supplier to the business.
2. Involve trading processes from the business to a customer.
3. Involve trading between the business and other intermediaries.
4. Do not include any transactions once raw materials are put into production.

A. 1, 2, 3, and 4 are all correct.

B. 1, 2, and 4 are correct.
C. 1, 2, and 3 are correct.
D. 1, 3, and 4 are correct.

44. The term for software solutions that help businesses manage customer relationships in an
organized way is:
A. Sales and service
B. Customer relationship management
C. Corporate services
D. Human capital resources

45. All of the following are types of integration strategies utilized by an ERP system except:
A. People Integration
B. Process Integration
C. Information Integration
D. Supply Chain Integration

Ch 6 Test bank – 3e Page 8 of 26

46. The two tiers of ERP systems are:
A. The internal tier and external tier.
B. The vendor & customer tier and the employee tier.
C. The large, multinational corporation tier and the midsize business tier.
D. The acquisitions tier and the sales tier.

47. Which of the following companies would be most likely to use a Tier Two ERP software?
A. AT&T
B. Walmart
C. Rite Aid, a national Pharmacy Store Chain
D. None of the Above

48. The ERP program that uses the term “back office” in reference to managerial functions and
“front office” in reference to customer and sales functions is:
A. SAP R/3
B. Oracle Applications
C. Peoplesoft
D. mySAP

49. The first “pure Internet” architecture, with no programming code residing on the client
computer was:
A. SAP R/3.
B. Oracle Applications.
C. Peoplesoft.
D. mySAP.

50. Select the true statement from the following:

A. The strength of SAP is its human resources capabilities.
B. The strength of Peoplesoft is its manufacturing capabilities.
C. The strength of SAP is its financial reporting capabilities.
D. The strength of Peoplesoft is its human resources capabilities.

51. ERP implementation:

A. Must accomplish a full ERP system implementation.
B. May install only selected modules.
C. Must be done one module at a time.
D. Is a short duration process due to total integration of the software.

Ch 6 Test bank – 3e Page 9 of 26

52. Best of breed means:
A. Picking the best ERP software on the market for the particular type of business or
organization.
B. Picking the best software on the market for a particular type of business process for this
size of an organization.
C. Picking the best consulting firm to accomplish implementation of the ERP software.
D. Utilizing the most capable employees within the organization work with the implementation
of the ERP application.

53. The advantage of “best of the breed” is:

A. The best functionality of the ERP system as a result of total implementation.
B. The best functionality of a unique process of the organization.
C. Best cost of implementation of the ERP system.
D. Total integration of the ERP modules

54. Business process reengineering (BPR):

1. Aligns business processes with IT systems to record processes.
2. Reengineer the underlying processes to be more effective.
3. Improves the efficiency of the underlying process through automation.
4. Requires significant investment in IT resources.
5. Does not have a mutual enhancement effect with IT.

A. 1, 2, 3, 4, and 5.
B. 1, 3, 4, and 5 only.
C. 1, 2, 3, and 5 only.
D. 1, 3, and 4 only.

55. When computerized technology is introduced into processes, the processes

A. Must utilize standardized forms and screens for data entry.
B. Can be radically redesigned to take advantage of the speed and efficiency of computers to
improve processing efficiency.
C. Data retrieval from the databases will be restricted to upper management for analysis.
D. Both B and C are correct.

56. Business process reengineering means:

A. Configuring the business processes to conform to the functionality of the IT system.
B. Configuring the IT system to the business process for best processing speed.
C. Matching the IT and business processes to achieve the greatest mutual benefit from each.
D. Configuring both IT and business processes to meet the goals of ERP.

Ch 6 Test bank – 3e Page 10 of 26

57. Business process reengineering means:
A. Reconfiguring the ERP system to fit the current methods of the organization.
B. Retaining general software applications as legacy systems to reduce training and
implementation costs.
C. Modifying business processes to take advantage of the capabilities of the ERP system.
D. Acquiring additional computer networking resources to effectively handle current business
processes.

58. Customizing an ERP system:

1. Will tailor the ERP system to the user.
2. May have a prohibitive cost.
3. May hinder future system upgrades.
4. Is recommended wherever possible.

A. 1, 2, 3, and 4.
B. 1, 2, and 4 only.
C. 1, 3, and 4 only.
D. 1, 2, and 3 only.

59. A consulting firm helping a company with the implementation of an ERP system will typically
perform all of the following actions except:
A. Evaluating and selecting an ERP system
B. Hiring specialized technicians to maintain the system
C. Implementing the software
D. Training employees to use the system

60. Data conversion will:

1. Require an appropriate amount of time be devoted to the conversion.
2. Be done at a minimal cost.
3. Import data from many legacy systems into a single RDBMS.
4. Require cleansing of errors and configuration inconsistencies.

A. 1, 2, 3, and 4.
B. 1, 2, and 4 only.
C. 1, 3, and 4 only.
D. 1, 2, and 3 only.

61. The big bang approach to implementation means that the company:
A. Will buy one integrated system to accomplish all business processes.
B. Implements all modules and all function areas of the ERP system at one time.
C. Commences training and data cleansing throughout the organization on one date.
D. Implements the business process reengineering process on a predetermined date.

Ch 6 Test bank – 3e Page 11 of 26

62. All of the following are implementation of software systems EXCEPT:
A. The big bang implementation.
B. Location-wise implementation.
C. Progressive implementation.
D. Modular implementation.

63. Which of the following ERP implementation methods is rarely used today due to its high rate of
failure?
A. Big Bang
B. Location-Wise
C. Modular
D. Micro-Enterprise Approach (MEA)

64. More than one-half of ERP implementations by the ________ approach experienced significant
failures or problems in the 1990s, and nearly one-third of these implementations abandoned in
progress.
A. Big bang
B. Location-wise
C. Progressive
D. Modular

65. When one site is utilized as the pilot approach to ERP, the implementation method is referred to
as:
A. Big bang implementation
B. Hardware implementation
C. Location-wise implementation
D. Modular implementation

66. The advantages and disadvantages of modular implementation are:

A. Full system integration is available but hardware incompatibilities exist.
B. Reduces the risks associated with installation and operation of the system, but full system
integration is not available.
C. All employees are exposed to some portion of the ERP system but critical information is still
in the legacy system.
D. Critical information is still available in the legacy system but technical support is not readily
available for the legacy system.

67. Benefits of an ERP system include all of the following EXCEPT:

A. The real-time nature of processing increases the total processing time.
B. The interactive nature of the modules allows processes to interact with each other.
C. ERP systems have evolved from many years of software experience so the software reflects
tried and true practices.
D. There is the capability to analyze large amounts of data in a single database.

Ch 6 Test bank – 3e Page 12 of 26

68. ERP system benefits include all EXCEPT:
A. ERP systems are built to interact with the IT systems of trading partners such as customers
and suppliers.
B. ERP systems are configured upon implementation to exceed any reasonable business
growth in the future.
C. The ERP systems incorporate modules to conduct e-commerce and e-business.
D. Analytical tools that enable detailed analysis of the data are incorporated into ERP systems.

69. Organizational benefits of ERP implementation include all EXCEPT:

A. Retaining long-held work patterns and work focus.
B.Facilitating organizational learning.
C. Building a common vision.
D. Increased employee morale and satisfaction

70. Factors which adversely affect the implementation of an ERP system do NOT include:
A. Cost
B. Complexity
C. Size
D. Scope

71. If one module in the ERP system fails,

A. The rest of the system will operate correctly.
B. It has the potential to stop or disrupt all processes across the entire enterprise
C. That one module will automatically revert to the legacy system.
D. Will result in the entire system reverting to the legacy system.

72. Operation risks with an ERP system includes all of the following EXCEPT:
A. Security is a greater risk because processes are integrated.
B. An unauthorized user can affect more processes in the legacy system.
C. Incorrect data generated in a given process can automatically post flawed data to other
processes.
D. Online privacy and confidentiality risks are magnified.

73. All of the following are operation risks of ERP systems except:
A. Availability
B. Online Privacy
C. Confidentiality
D. Duplicate Information

74. The assigning of access and authority for a specific user ID is called a ________.
A. User profile
B. User access account
C. User account
D. Profile of access

Ch 6 Test bank – 3e Page 13 of 26

 75. As required by Sarbanes-Oxley, enhanced ERP systems provide feedback to management
regarding internal controls. To effectively use the function, there are important steps that need
to be taken.
1. Establish and maintain a list of compatible duties.
2. Insure that employees are given access and authority only to those parts of
the system required.
3. Periodically review the user profile and change any access and authority
levels as necessary.
4. Configure the ERP system to track and report any instances where an
employee initiated or records any event.
5. Monitoring the periodic reports or real-time reports by the appropriate
manager to determine if user profiles have changed.
A. 1, 2, 3, 4, 5
B. 2, 3, 5
C. 1, 2, 4, 5
D. 2, 3, 4, 5

76. With the proper implementation of an ERP system:

A. Fraud due to inappropriate transaction recording is eliminated.
B. Employee IDs, passwords, and segregated duties aid in internal control measures.
C. Audit trails are not necessary due to ID and password security concepts.
D. All of the above, A, B, and C, are correct answers.

77. To prevent issues with segregation of duties within an ERP system, the system may do which of
the following?
A. Limit the types of transactions each employee can perform.
B. Limit access to physical hardware.
C. Both A and B.
D. None of the Above.

78. To resolve discrepancies on invoices so that they can be paid on a timely basis, management
may issue which of the following?
A. Report on purchase orders created after the invoice date
B. Blocked invoice Report
C. Requisition Invoice Report
D. Purchase Order Transcription Report

TEST BANK - CHAPTER 6 - TRUE / FALSE

1. The intent of an ERP (enterprise resource planning) system is to provide a single software
application for revenue, expenditures, conversion, and administrative processes.
TRUE

Ch 6 Test bank – 3e Page 14 of 26

2. 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.
FALSE

3. An enterprise resource planning (ERP) system integrates all business processes and functions
into a single software system using a single database.
TRUE

4. An enterprise resource planning (ERP) system would update accounts receivable and inventory
when purchased goods are received from a vendor.
FALSE

5. 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.
TRUE

6. Manufacturing resource planning software systems are outgrowths of the ERP concept.
FALSE

7. ERP applications use modules such as financials, human resources, data warehouse, and
analytics.
FALSE

8. ERP data is stored in both financial and operational databases.

FALSE

9. The data warehouse is up dated as transactions are processed.

FALSE

10. Today’s ERP systems can be traced back to the first generation of materials requirements
planning software.
TRUE

11. Early MRP applications utilized sales forecasts to compute material requirements for
production.
TRUE

12. The purpose of MRP II was to integrate manufacturing, engineering, marketing, finance, and
human resources units to run on the same information system.
FALSE

13. SAP R/3 had tremendous growth due to the use of closed architecture and client-server
hardware compatibility.
FALSE

Ch 6 Test bank – 3e Page 15 of 26

 14. Y2K compatibility issues arose because computers kept dates in mm/dd/yy type formats.
TRUE

15. ERP II has additional modules including customer relationship management and supply chain
management for enhanced e-commerce transactions.
TRUE

16. MRP II systems let vendors track customer inventory levels and trigger inventory shipments
when prearranged levels are met.
TRUE

17. Spending for ERP and ERP II systems has been consistently growing since the mid 1990s and the
Y2K events.
FALSE

18. The financial module of an ERP such as SAP might contain such components as financial
accounting, management accounting, corporate governance, and inventory.
FALSE

19. The product development module of an ERP such as SAP might contain such components as
production planning, manufacturing execution, operations analysis, and enterprise asset
management.
FALSE

20. ERP systems such as SAP normally batch their financial transactions for processing due to the
large amounts of data.
FALSE

21. ERP systems such as SAP normally post their financial transactions in real-time for current
information through all of the appropriate modules.
TRUE

22. Management must examine feedback from the ERP system to assist in the proper management
and control of operations and financial conditions.
TRUE

23. Supply Chain Management integrates supply and demand management within and across
companies.
TRUE

24. Processes in supply chain management involve trading processes from a supplier to a business
only.
FALSE

25. Sales and service is a term for software solutions that help businesses manage customer
relationships in an organized way.
FALSE

Ch 6 Test bank – 3e Page 16 of 26

26. CRM is a term for software solutions that help businesses manage customer relationships in an
organized way.
TRUE

27. CRM success depends entirely on the implementation of the software package designed for
customer relationship support.
FALSE

28. Tier one includes software often used by large, multinational corporations.
TRUE

29. Tier two describes software used by midsize businesses and organizations.
TRUE

30. Tier one describes software used by midsize businesses and organizations.
FALSE

31. Tier two includes software often used by large, multinational corporations.
FALSE

32. Peoplesoft uses the terms “back office” in reference to managerial functions and “front office”
in reference to customer and sales functions.
FALSE
33. SAP was the first “pure Internet” architecture, with no programming code residing on the client
computer.
FALSE

34. The strength of SAP is the human resources aspects of an organization.

FALSE

35. The strength of Peoplesoft is the human resources aspects of an organization.

TRUE

36. The differences between Tier One and Tier Two software are becoming more definitive as the
Tier One vendors attempt to attract larger companies.
FALSE

37. All ERP vendors have developed cloud-based ERP products.

TRUE

38. One of the greatest risks of ERP cloud systems is the potential service outage that might cause
the system to be unavailable.
TRUE

39. One of the greatest risks of ERP cloud systems is their vulnerability to hackers.
FALSE

Ch 6 Test bank – 3e Page 17 of 26

40. The best fit software is usually defined by the client’s hardware and intranet structure.
FALSE

41. When ERP implementation is started, all of the legacy system must be replaced for proper
operation.
FALSE

42. Best of breed means picking the best ERP software on the market for the particular type of
business or organization.
FALSE

43. Business process reengineering (BPR) is the purposeful and organized changing of business
processes to make them more efficient.
TRUE

44. Business process reengineering means tailoring both the business process to IT and the IT
process to the business process for best functionality and processing.
TRUE

45. 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.
FALSE

46. Customizing an ERP system should be limited due to cost and upgrading to the system in the
future.
TRUE

47. ERP implementation costs are kept to a minimum by retaining the legacy computer hardware
and operating systems.
FALSE

48. The decision as to whether to adopt cloud-based ERP systems will not have much impact on the
computer hardware and IT infrastructure needed.
FALSE

49. A cloud-based ERP system will require less infrastructure at the company.
TRUE

50. Due to the integration of design, ERP systems do not require extensive testing if implementation
does not entail best of breed or legacy modules.
FALSE

51. 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.
FALSE

Ch 6 Test bank – 3e Page 18 of 26

52. Training of employees will be minimal due to BPR and system’s integration.
FALSE

53. 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.
FALSE

54. The big bang theory of implementation is preferred due to the limited problems incurred in
transition.
FALSE

55. Modular implementation and pilot implementation are both considered methods of
implementation.
FALSE

56. Location-wise implementation and pilot implementation are both considered methods of
implementation.
TRUE

57. The real-time nature of processing decreases the total processing time and allows more
immediate feedback to management.
TRUE

58. The real-time nature of processing increases the total processing time and precludes immediate
feedback to management.
FALSE

59. ERP systems are built to interact with the IT systems of trading partners such as customers and
suppliers.
TRUE

60. ERP systems can grow with the business.

TRUE

61. ERP implementation regarding IT infrastructure benefits include building business flexibility for
current and future changes
TRUE

62. The integration of an ERP system compensates for its scope, size, and complexity to make
implementation less risky than most IT systems.
FALSE

63. 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.
TRUE

Ch 6 Test bank – 3e Page 19 of 26

 64. Since ERP systems are modular the risks of implementation enterprise-wide are minimized.
FALSE

65. Within an ERP system unauthorized access to a purchase module could trigger a related
unauthorized payment within accounts payable.
TRUE

66. Conflicting abilities are also referred to as incompatible duties.

TRUE

67. The assigning of access and authority for a specific user ID is referred to as a user profile.
TRUE

68. Segregation of duties require within an ERP system is difficult due to the free access allowed to
employees.
FALSE

69. As the result of promotions or job changes, an employee may have different access or
authorizations. Because of this, it is important that a company review user profiles and make
changes to access and authority levels.
TRUE

70. ERP will automatically track and report any instances where an employee initiates or records an
event with conflicting abilities. It is not necessary to configure the system to accomplish this.
FALSE

71. Based on each employee’s user profile, audit trails can be constructed and reported which
employees initiated or conducted individual processes.
TRUE

72. Due to their level of integration, ERP systems have difficulties in properly segregating duties.
FALSE

73. The ERP system can incorporate a matrix of tasks that are compatible.
TRUE

FOR SHORT ANSWER AND ESSAY QUESTIONS REFER TO THE NEXT PAGE.

ALL SHORT ANSWER AND ESSAY QUESTIONS ARE NEW IN THIS EDITION

Ch 6 Test bank – 3e Page 20 of 26

Question 1. SO 6 Implementation of an ERP system

There are many important factors and issues to consider when an organization attempts to
implement an ERP system. List and describe the issues outlined in the text that organizations
should consider when implementing an ERP system.

No. Factors to Consider Explanation

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

Ch 6 Test bank – 3e Page 21 of 26

 SOLUTION

IMPLEMENTATION OF ERP S Y S T E MS
There are many important factors and issues to bear in mind when an organization considers
implementation of an ERP system. The management of an organization must consider each of these
issues either before or during the ERP implementation. These issues include the following:

1. Hiring a consulting firm

2. The best-fit ERP system
3. Which modules to implement
4. Best of breed versus ERP modules
5. Business process reengineering
6. Customization of the ERP system
7. The costs of hardware and software
8. Testing the ERP system
9. Data conversion
10. Training of employees
11. Method of conversion, or “going live”

HIRING A CONSULTING FIRM

Very frequently, organizations considering an ERP implementation hire a consulting firm to assist with all
or part of the implementation. If a consultant is hired to assist in the entire process, the consulting firm
will help with the remaining factors 2 through 11 described in the next subsections.

THE BEST-FIT ERP SYSTEM

An organization must choose the ERP system that best suits its needs. Those concepts apply also in
selecting an ERP system; however, there are additional factors unique to ERP systems that must be
considered. One such factor is the system’s area of specialization. The organization must consider its
business processes and how well each ERP system operates for those processes. Consulting firms are
often used to assist in selecting an ERP system.

WHICH MODULES TO IMPLEMENT

ERP systems have modules available for all typical processes and functions of an organization. However,
each additional module that an organization chooses to purchase and implement adds cost,
implementation time, and implementation difficulties. For some processes, a company may choose to
keep a legacy system rather than purchase an ERP module.

BEST OF BREED VERSUS ERP MODULES

While ERP systems usually are intended to fit all business processes of an organization, some experts
believe that ERP systems do not necessarily offer the best solution for all processes. It is difficult for any
single software system to offer the best possible modules in all areas of business processes. This is
especially true since ERP systems are designed to have a very broad appeal across many different kinds
of organizations. This broad appeal is accomplished by building ERP modules around standard, generic
business processes. Therefore, some experts believe that an organization is better served by using one
brand of ERP system for many processes, but to select some modules from other vendors that are “best
of breed.” Best of breed means the best software on the market for a particular type of business
process for this size of an organization.

Ch 6 Test bank – 3e Page 22 of 26

A best of breed approach is usually applied when an organization has some processes that may be
different from the generic processes. Those processes that may be unique or a little more specialized
might be better handled by a best of breed rather than the ERP module.

BUSINESS PROCESS REENGINEERING

Business process reengineering (BPR) is the purposeful and organized changing of business processes to
make them more efficient. BPR not only aligns business processes with the IT systems used to record
processes, but it also improves the efficiency and effectiveness of these processes. Thus, the use of
sophisticated IT systems usually leads to two kinds of efficiency improvements. First, the underlying
processes are reengineered so as to be conducted more efficiently. Second, the IT systems improve the
efficiency of the underlying processes through automation.

BPR is an important aspect of ERP system implementation. Since most organizations’ processes do not
match the processes in the ERP system for any individual module, BPR is usually undertaken to make the
business processes more compatible with the ERP modules.

CUSTOMIZATION OF THE ERP SYSTEM

As often as possible, organizations should attempt to undertake BPR to match their processes to the ERP
system. However, there are cases in which it may be necessary to customize the ERP system rather
than change the business processes. Most consultants and experts would recommend that the number
of customizations be limited to the least amount necessary. The two primary reasons for limiting
customization are cost and upgrading of the system. Any customizations may require changing or
writing new programming code, which can be a very expensive and time-consuming task. The cost of
customization can easily exceed the cost of packaged ERP software. Second, customizations cannot be
automatically incorporated when the ERP vendor provides an upgraded version of the ERP system.
Therefore, upgrading to the next version may mean losing any customization.

THE COSTS OF HARDWARE AND SOFTWARE

Implementation of ERP systems usually requires the purchase of new computer hardware, systems
software, network equipment, and security software. The cost of hardware is dependent on the size of
the organization, its current hardware and software, and the scope of implementation of the ERP
system. The decision whether to adopt cloud-based ERP systems will also have a tremendous impact on
the computer hardware and IT infrastructure needed. A cloud-base system will require less IT structure
at the company. For ERP implementation in large organizations, hardware costs often exceed 1 million
dollars; while in midsized organizations, hardware typically costs about half a million dollars.

DATA CONVERSION
The implementation of an ERP system will involve converting data from legacy systems. Second
generation ERP systems use relational database management systems (RDBMS) to store enterprise data.
An appropriate amount of time, effort, and dollars must be devoted to the proper cleansing and
conversion of data.

TRAINING OF EMPLOYEES
Since ERP system implementation usually requires BPR, many processes that employees are involved
with will change. Thus, training is necessary because workers will often have to learn a new set of
processes. As is true of data conversion, it is expensive and time-consuming to train employees.

Ch 6 Test bank – 3e Page 23 of 26

 Question 2. SO6 Implementation of an ERP system
There are several methods of making the final conversion from an old system to a new ERP system. List
and describe the three most common approaches.

Method Description

SOLUTION

THE METHODS OF CONVERSION TO THE ERP SYSTEM

Near the end of the implementation process, the organization must “go live” with the new ERP system.
That is, after data conversion, training, software installation, and related tasks, a shift to the new ERP
system must take place. There are several methods of making this switch-over. The usual approaches
are
• Big bang,
o implements all modules and all functional areas of the ERP system at once
o requires that all functional areas of the company are ready to make the change at the
same time
o big bang approach has the potential to reduce the time and cost of implementation.
However, it is extremely difficult to execute a big bang con- version well
• Location-wise, and
o Organization chooses a specific location or subunit of the organization and implements
the ERP system in that place only
o Considered a “pilot” approach in which the ERP is first carried out in a subunit of a larger
organization
• Modular implementation
o Is implemented one module at a time
o Implementation team will normally focus on the most critical module first and then
complete in descending order
o Normally limits the scope of implementation to one functional department
o Reduces the risk associated with installation and operation of ERP systems

Ch 6 Test bank – 3e Page 24 of 26

 Question 3. SO7 Benefits of ERP Systems
There are a number of benefits associated with implementation of a new ERP system. Describe six
benefits that your text outlines for the implementation of a new ERP system.

BENEFITS AND RISKS OF ERP SYSTEMS (STUDY OBJECTIVE 7)

No. Benefit of an ERP Explanation

System

1.

2.

3.

4.

5.

6.

SOLUTION

BENEFITS OF ERP SYSTEMS

The characteristics that allow organizations to benefit are the following:

1. The interactive nature of the modules allows processes to interact with each other. For
example, the ordering and receiving processes can automatically trigger payment processes.
2. The real-time nature of processing decreases the total processing time and allows more
immediate feedback to management.
3. 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.
4. The single database enhances sharing of information between the business’s functional areas
and between processes.
5. There is the capability to analyze large amounts of data in a single data- base. Analytical tools
that enable detailed analysis of the data are incorporated into ERP systems.

Ch 6 Test bank – 3e Page 25 of 26

Test Bank For Accounting Information Systems: Controls and Processes, 3rd Edition: Controls

6. The capability to enhance e-commerce and e-business—the ERP systems of today incorporate
modules to fully incorporate e-commerce and e-business.
7. ERP systems have 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.
8. ERP systems are scalable, which means they can grow with the business.

Ch 6 Test bank – 3e Page 26 of 26

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