What is an ERP System Audit?
How Are ERP Systems Audited?
ERP Audits are integral for the business to analyse if the information shared is accurate in terms of compliance, security and efficiency ensuring enhanced organisational performance and risk mitigation. Factors of this process include data integrity, security controls, process adherence and the entire system performance. All these factors ensure that they meet business goals and regulatory requirements.
The major purpose of auditing an ERP is to ensure that the data provided by this system is accurate and reliable. Stakeholders want an assurance that the information supplied to them by an ERP is valid. The information should be in alignment with the requirements of the business. All these data will be considered for decision-making and to create effective strategies.
How are ERP Systems Audited?
Auditing ERP involves a systematic evaluation of various aspects to ensure their effectiveness, security, and compliance with organizational policies and industry standards. Here is an overview of how ERP are typically audited:
Planning and Scoping:
Define the scope of the ERP audit, including the specific modules, processes, and areas to be examined.
Determine the audit objectives, such as assessing security controls, compliance with regulations, or system performance.
Risk Assessment:
Identify potential risks associated with the ERP, including security vulnerabilities, data integrity concerns, and compliance risks.
Documentation Review:
Examine documentation related to the ERP system, including policies, procedures, user manuals, and system configurations.
Security Assessment:
Evaluate the security controls in place, including user access controls, authentication mechanisms, encryption protocols, and measures to prevent unauthorized access.
Compliance Verification:
Ensure that the ERP adheres to relevant industry standards, legal requirements, and internal policies. This may include compliance with regulations like GDPR, HIPAA, or industry-specific standards.
Data Integrity and Accuracy:
Verify the accuracy and reliability of data stored in the ERP. This may involve sampling data and comparing it to source documents.
Process and Workflow Evaluation:
Assess the efficiency and effectiveness of business processes within the ERP. Identify areas for improvement or optimization.
Customization and Modification Assessment:
Review any customizations or modifications made to the ERP to ensure they align with organizational needs and do not introduce vulnerabilities.
Performance Testing:
Evaluate the speed, responsiveness, and overall performance of the ERP, especially during peak usage times.
Vendor Compliance (if applicable):
Assess whether the ERP vendor is fulfilling contractual obligations, providing necessary support, and delivering updates or patches as agreed.
Change Management Review:
Evaluate how changes, updates, and patches are managed within the ERP to prevent disruptions and ensure a smooth transition.
User Access and Permissions Verification:
Review the roles and permissions assigned to users within the ERP to ensure appropriate access levels and segregation of duties.
Disaster Recovery and Business Continuity Testing:
Test the ERP’s ability to recover data and operations in the event of a disaster or system failure.
Reporting and Documentation:
Compile audit findings, including any identified risks, deficiencies, or areas for improvement, into a comprehensive report.
Recommendations and Remediation:
Provide recommendations for addressing identified risks or deficiencies. This may include implementing new controls, revising policies, or conducting further training.
By following these steps, auditors can thoroughly evaluate an ERP to ensure it operates effectively, securely, and in compliance with organizational and regulatory requirements.
What are the Types of ERP Audit?
Management can choose an internal or an external audit to check data accuracy. Internal Audit is crucial for the business to ensure that the effectiveness of ERP from the inside is efficient and reliable. For external audits, the work primarily relies on the interests of the third parties. It is full of procedures, and guidelines given by investors and other organizations.
There are various ERP Audits, however, one variant won’t fit all types of businesses. Learn more about the different types of audits required for the ERP:
▸ Compliance Audit
In the Compliance Audit, you need to evaluate if documented processes are being followed by individuals. It can also check if all touchpoints concerning the ERP solution are covered. In simpler terms, it means that if they are fully compliant.
▸ Process Audit
The process Audit deals with auditing specific processes of the system, for example, ERP audit of purchase order processes. Here, the audit will check if purchase orders have been set within the levels of ERP or not.
▸ System Audit
The System Audit is another type of ERP audit that can be carried out from the perspective of the systems at your workplace. It will check if an appropriate network or hardware is available for the efficient use of ERP.
▸ Security Audit
A Security Audit is another highly significant type of ERP audit that needs to be taken into consideration for better improvement in the business processes. It starts with identifying the users that have direct access to the data or with making the data open for all appropriate persons.
▸ Waste Audit
In the Waste Audit, the unnecessary elements causing wastage or halting the regular functions are identified and improved. Waste includes the overproduction to process wait times. Hence, identifying these issues can minimize waste and decrease operational costs.
ERP Auditing Checklist for Success
ERP auditing is crucial for the enterprise to ensure that the information delivered is accurate, valid and free from anomalies. The Process of Auditing ERP includes the following-
1. Know Your Objectives
Understanding the objectives of auditing helps you to get aligned with your business goals and ensures that your audit process is successful.
Take an example of a waste audit in which the main objective would be to check for overproduction issues in the supply chain area.
2. Make a Team
Making a team of auditors is the most important step. Also, you should check for a person who can test and review the ERP accurately concerning your business objectives. Besides engineering or an IT team, take valuable insights from the daily users of the system.
3. Create a Transparent Process for Raising Issues
For effective ERP auditing, you should consider the simplicity of your ERP to review and audit issues. In order to develop a simple process for raising and reviewing auditing results, it is most crucial to launch a sturdy and successful project.
4. Appropriate Recording of Issues
Once you have checked the system issues, you should rectify the data that needs to be recorded. Usually, the typical descriptions would talk about the issue briefly and the details of the auditor who identified the problem. Hence, such ERP audits need to be considered precisely.
5. Execution of Changes
Whenever the audit is finished, it is quite important to keep the issues as per priority. However, the issues will depend upon the severity and then should be allocated to the relevant team members. This way, you can make your auditing relevant and precise. Hence, investing in the right resources and time can make every needed change within the modules.
Why is ERP Audit Essential?
ERP Audits are performed for the following reasons:
▸ For Data Security: When auditing check if your ERP modules are integrating accurate information from across the departments. Through audits, improvements can be made in case of any data cluster which may be endangering your business.
▸ Protects Compliance: If your industry type is heavily regulated, regular audits will be helpful as they will ensure that updated rules are adhered to each time.
▸ Boosts security: Audits help maintain robust security by keeping the system updated. Sometimes, individual modules can pose a threat to the ERP system in supply chain management
▸ Eliminates Errors: Businesses are wide and involve many processes, so, it is subjected to errors. Regular audits can highlight the mistakes early before they become something major. You can later make improvements to rectify those errors.
▸ Consistent0 Return on Investment(ROI): Many businesses invest in an ERP to reduce operational costs. Unless you conduct regular ERP audits, you will never come to know if your system is delivering the desired consistent ROI. It assures you that all the processes are contributing to your revenue goals.
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