Systems Applications Products audit
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What is SAP’s relationship to ERPs?
Enterprise resource planning systems are specifically designed to help with the accounting function and the control over various other aspects of the companies business such as sales, delivery, production, human resources, and inventory management. There are three main ERP’s used in today’s larger businesses, they are; SAP, Oracle, and PeopleSoft. Despite the benefits of ERP’s there are also many potential pitfalls that companies who turn to ERP’s occasionally fall into.
What is SAP?
SAP is the acronym for Systems, Applications, Products. It is a mainframe system that provides users with a soft real time business application. It contains a user interface and is extremely flexible.
What is the history of SAP?
Systems, Applications, Products in data processing or SAP was originally introduced in the 1980’s as SAP R/2 which was a mainframe system that provided users with a soft-real-time business application that could be used with multiple currencies and languages. Later when client servers were introduced SAP brought out a server based version of their software called SAP R/3, henceforth referred to as SAP, which was launched in 1992. They also developed a graphical user interface or GUI to make it more user friendly and to move away from the mainframe style user interface. For the next 10 years SAP dominated the large business applications market. It was successful primarily because it was extremely flexible. Because SAP was a modular system meaning that the various functions provided by it could be purchased piecemeal it was an extremely versatile system. All a company needed to do was purchase the modules they wanted and customize the processes to match the company’s business model. SAP’s flexibility, while one of its greatest strengths is also one of its greatest weaknesses. We will now turn to the audit issues surrounding SAP.
What are the two main issues in a SAP Audit?
There are two main areas of concern when doing an SAP audit, they are; Security, and Data Integrity. We will discuss these issues from implementation to production to show how this evolution must be monitored closely or all other efforts to ensure the accuracy of the data provided by the system will be mute.
Security – Security concerns are the first and foremost concern in any SAP audit. Making sure that there is proper segregation of duties and access controls is paramount to establishing the integrity of the controls for the system. When a company first receives SAP it is almost devoid of all security measures. When implementing SAP a company must go through an extensive process of outlining their processes and then building their system security from the ground up to ensure proper segregation of duties and proper access. Proper profile design and avoidance of redundant user ID’s and super user access will be important in all phases of operation. Along with this comes the importance of ensuring restricted access to terminals, servers, and the datacenter to prevent tampering. Because each company will have different modules each company’s security structure will be distinctly different.
With security it all starts at the beginning with the proper design and implementation of security and access measures for employees. For new employees it is important that their access is set up properly and that future access granted has proper approval. After the system has been implemented the control over system changes and the approval process required for it is vital to ensure the continued security and functionality of the system. Without proper security measures in place from start to finish there will be a material weakness in the controls of the system because of this there will likely be some level of fraud as well.
Through security you are able to monitor who has access to what data and processes and ensure that there is sufficient segregation of duties so as to prevent someone from perpetrating fraud. One of the major advantages of SAP is that it can be programmed to perform various audit functions for you. One of the most important of those is for reviewing user access and using the system to cross check based on an access matrix to ensure that proper segregation is in place so a person with payment request access does not also have access to create a vendor.
After ensuring that security is set up to ensure proper segregation of duties the next area of concern surrounding security is with regards to system changes. All companies should have three different systems: the development system, the test system, and the production system. All changes to production will need to be run through an approval process and be tested to ensure that they will function properly when introduced into the production system. The security around who can authorize a change and who can pull that change through into production is paramount to ensuring the security and integrity of the system. Review of this process and the people involved with it will be a key to the audit of the system.
The goal of auditing the access, steps and procedures for system updates is to ensure proper controls over change management of the system and to ensure that proper testing and authorization procedures are being used. All of these measures also affect our second major area of concern, data integrity.
Data Integrity – Because SAP integrates data from Legacy systems it is extremely important to ensure that the mapping of the interaction between the legacy systems and SAP is thorough and complete. Without that any data received from SAP would be suspect. Also, it is important that proper backups of the database be maintained along with an up to date and practiced disaster recovery plan to ensure continuity after a disaster. A thorough review of these plans along with the mapping of system interfaces will be important in this phase of the audit. Also, because all SAP data is stored on inter-related tables it is possible for users with certain security to change them. It is extremely important that the output be verified to ensure accuracy. SAP does provide some basic audit programs to assist with the review of data to ensure that it is processing properly. It is also customizable so that a user can create a program to audit a specific function.
The monitoring of change management, the moving of updates to the system from the development stage is one of the key elements of this particular concern. The review and testing procedures for these programs that are being pulled through to production need to be painstakingly reviewed to ensure that they will function properly and not adversely affect another area of the system. If anything is missed the potential for a processing error or system crash could cause some major concern. Because of this review of the process of review and pull through to production needs to be a high priority.
Controls around the system need to be reviewed especial around the accounts payable and account receivable sub ledgers. Auditors must perform or review reconciliations between SAP and external information such as bank reconciliations and A/P statement reconciliations. They must review cost center and responsibility accounting, management review and budgetary control and the route of authorization for non-routine transactions.
The audit review should include a review of validation of data that is input in certain transactions, the design of ABAP statements and their authority checks matching documents prior to closing. Also, with regard to the master file control there must be an independent review of master file changes and creation of transactional responsibilities to identify any redundant master files.
When it comes to data integrity the primary concerns are the integration of data from the legacy systems and then ensuring that data being input into the system for processing has been properly approved and is accompanied by the proper documentation. Through reviewing these aspects of the processing from implementation through to production you can gain reasonable confidence that the controls surrounding the data are sufficient and that the data is likely free of material error. The use of the built in audit functions will greatly assist with this process and the ability to create your own audit programs will allow you to customize the work to the company you are working with.
The two major control risks that need to be monitored with SAP are security and data integrity. To ensure that both are sufficient it is important that both be properly outlined and developed during implementation. User profiles must be designed properly and access must be sufficiently segregated to minimize the chance of fraud. Use of the SAP audit functions to cross check the user access with the matrix of allowable accesses is the quickest and easiest way to ensure that duties and access are properly segregated. New and old users must be entered and removed promptly and avoidance and monitoring of any super user access is imperative. Also, review of the access to upload and pull through changes to production and review of the associated authorization process is important from both a security and data integrity point of view. To further ensure data integrity it is important that proper documentation be reviewed along with confirmation of any external data available either through a legacy system or through a third party. This is extremely important with regard to certain sensitive accounts such as A/P. Review of controls around budgets and management review and also review of authorization for non-routine transactions and physical access will be imperative to ensuring the accuracy of the data input and output from the system. The use of and development of tools within SAP will help accelerate this process and help to ensure that it is accurate. These are the two most vital parts to any SAP audit and successful review of them should allow you to determine the adequacy of control around the SAP system and access to it to determine whether or not there are any material deficiencies with the systems controls.