Chapter 1
The Information System: An Accountant’s Perspective
Enterprise Resource Planning Systems
Enterprise resource planning (ERP) is an information system model that enables an organization to automate and integrate its key business processes. ERP breaks down
traditional functional barriers by facilitating data sharing, information flows, and the introduction of common business practices among all organizational users. The
implementation of an ERP system can be a massive undertaking that can span several years. Because of the complexity and size of ERPs, few organizations are willing or
able to commit the necessary financial and physical resources and incur the risk of developing an ERP system in-house. Hence, virtually all ERPs are commercial
products. The recognized leaders in the market are SAP, Oracle, Baan, J.D. Edwards & Co., and PeopleSoft Inc. ERP packages are sold to client organizations in modules
that support standard processes. Some common ERP modules include: Asset Management Financial Accounting Human Resources Industry-Specific Solutions Plant Maintenance
Production Planning Quality Management Sales and Distribution Inventory Management One of the problems with standardized modules is that they may not always meet the
organization’s exact needs. For example, a textile manufacturer in India implemented an ERP package only to discover that extensive, unexpected, and expensive
modifications had to be made to the system. The ERP would not allow the user to assign two different prices to the same bolt of cloth. The manufacturer charged one
price for domestic consumption, but another (four times higher) for exported products. That particular ERP system, however, provided no way to assign two prices to the
same item while maintaining an accurate inventory count. Organizations that hope to successfully implement an ERP will need to modify their business processes to suit
the ERP, modify the ERP to suit their business, or, more likely, modify both. Often, additional software applications need to be connected to the ERP to handle unique
business functions, particularly industry-specific tasks. These applications, often called bolt-ons, are not always designed to communicate with ERP packages. The
process of creating a harmonious whole can be quite complex and sometimes fails, resulting in significant losses to the organization. ERP packages are enormously
expensive, but the savings in efficiencies should be significant. Organization management should exercise great care in deciding which, if any, ERP is best for them.
The evolution of information systems models outlined in this section provides a framework for much of the material contained this book. Chapters 2 through 8 deal with
business processes, security, fraud, controls, and a variety of other issues related to traditional (manual, flat-file, and early database) systems. Chapters 9 through
12 examine advanced database systems, the REA model, ERP, and other emerging technologies.
The Role of the Accountant
The final section of this chapter deals with the accountant’s relationship to the information system. Accountants are primarily involved in three ways: as system
users, designers, and auditors.
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