ERP audits review a company’s system to evaluate effectiveness, identify issues, and recommend improvements. Regular audits help optimise performance, reduce costs, mitigate risks, and align technology with business needs.
Introduction to ERP Audits
An ERP audit is a systematic review and examination of a company’s Enterprise Resource Planning (ERP) system to evaluate effectiveness, identify issues or noncompliance, and recommend improvements. ERP systems are business process management software that integrate various functions like accounting, supply chain, HR, manufacturing, etc.
ERP audits have become increasingly important as these systems now form the digital backbone of most organisations. Regular auditing helps optimise ERP performance, reduce costs, mitigate risks, and align technology with evolving business needs.
Types of ERP Audits
There are three main types of ERP audits: pre-implementation audits, post-implementation audits, and ongoing/periodic audits.
Pre-implementation Audits
As the name suggests, these audits are conducted before an ERP system is implemented. They assess the company’s readiness for the system, including processes, requirements, budgets, resources, timelines, and more. Pre-implementation audits help identify any gaps or issues that should be addressed beforehand.
Post-implementation Audits
These audits evaluate the ERP system after the implementation is complete. They verify that the system meets expectations around functionality, adoption, return on investment, and other key performance metrics. Post-implementation audits also identify any new issues that have arisen.
Ongoing/Periodic Audits
As opposed to a one-time post-implementation audit, some companies perform regular audits of their ERP system on a quarterly, biannual, or annual basis. These ongoing audits monitor system health, efficiency, security, and compliance over time. They can identify evolving issues or new optimization opportunities.
Pre-implementation ERP Audits
A pre-implementation ERP audit is conducted before an organization rolls out a new ERP system. The goal is to verify requirements, assess infrastructure readiness, identify gaps, and set implementation goals.
Areas examined in a pre-implementation audit include:
- User requirements – Do the planned system features align with business needs?
- IT infrastructure – Is the existing infrastructure capable of supporting the ERP system?
- Integration requirements – What legacy systems need to integrate with the ERP?
- Data migration plan – Is there a solid plan to migrate data into the new system?
- Project budget and timeline – Are they realistic?
The audit determines if the organization is fully prepared for the rollout from a process, people and technology perspective. It identifies any gaps that must be addressed pre-implementation. This reduces project risk and enhances the probability of a smooth and successful go-live.
Post-Implementation ERP Audits
Post-implementation ERP audits occur after an ERP system has gone live. They ensure the system is working as expected and delivering the anticipated benefits. Key areas reviewed in a post-implementation ERP audit include:
- Evaluating system performance against goals
The auditors measure if the system is achieving the targeted metrics for efficiency, cost savings, reporting, and other business goals. This identifies any gaps that need to be addressed.
- Checking data accuracy
Data accuracy is critical to maximise the value of an ERP system. Auditors thoroughly review if data inputs, transactions, and system outputs contain any errors or missing information.
- Reviewing system security
A highly secure system prevents unauthorised changes or access. Auditors check all security protocols are in place including encryption, access controls, network security, and user accounts.
- Confirming integration with other systems
An ERP system should integrate with other core systems like CRM, payroll etc. Auditors validate these integrations are working properly and data flows accurately between systems.
Ongoing ERP Audits
Ongoing ERP audits are periodic evaluations conducted after an ERP system has been implemented to monitor performance, maintain optimisation, and adapt to changes within an organisation. Unlike pre-implementation and post-implementation audits which focus on readiness and initial adoption, ongoing audits take a long-term view towards continually improving processes and technology.
Some reasons why companies perform regular ERP audits include:
- Monitor system performance metrics like transaction times, capacity, uptime and resource utilisation
- Maintain data integrity by auditing data inputs and outputs on a sample basis
- Evaluate if workflows and configured processes still align with business objectives as the company evolves
- Proactively identify opportunities for additional user training, updated SOPs, or process changes
- Adapt integration points with other systems to support new technologies or business needs
While the frequency may vary, many experts recommend conducting ongoing ERP audits at least annually. Scheduling them to coincide with landmarks like financial period-end can help streamline the process. Outside consultants often lead ongoing audits to provide an impartial perspective.
Overall, regular check-ups through ongoing ERP audits enable enterprises to stay ahead of issues, optimize ROIs on technology investments, and take a proactive approach towards continual improvement.
Areas Examined in an Audit
An ERP audit examines key areas that impact the effectiveness of a system, including:
Data Accuracy and Integrity
Auditors will assess the accuracy, completeness, and consistency of data in the ERP system. This helps identify any issues with invalid, duplicate, or outdated data which can negatively impact reporting and decisions.
System Security
The audit will evaluate the security mechanisms in place, such as access controls, password policies, encryption technologies, and permissions. This ensures sensitive data remains protected and compliance requirements are met.
Integration with Other Systems
Examining integration with related systems like CRM, HRIS, accounting software helps determine if critical information is being reliably transferred between applications. Flaws here can interrupt workflows.
System Performance
By assessing system speed, capacity levels, load times and bottlenecks, an audit pinpoints performance issues affecting productivity. Upgrades or added resources may be warranted.
User Access Controls
Reviews of user roles, rights and reporting structures help optimize authorization levels. This prevents security risks from excessive/deficient access and encourages accountability.
Process Efficiency
Audits determine if business processes take full advantage of ERP capabilities. Streamlining workflows and usage reduces costs and operational friction.
The Benefits of ERP Audits
Conducting regular ERP audits provides many important benefits for a business. Some key advantages include:
Optimisation
An ERP audit is the best way to identify opportunities to optimise your system and processes. By thoroughly examining configurations, integrations, data flows, user roles, and reporting, auditors can pinpoint areas for improvement. Implementing audit recommendations allows you to maximise the value from your ERP investment.
Cost Reduction
Audits frequently uncover redundancies, inefficiencies, and waste within an ERP system and related processes. By addressing these issues, companies can significantly reduce operational costs including licensing fees, support costs, and overhead.
Data Accuracy
ERP audits assess the integrity of data within the system. This allows businesses to identify and address any data quality issues or inaccuracies. Having reliable data leads to better reporting and analytics capabilities.
Security
Examining authentication protocols, access controls, network security, and cybersecurity procedures is a key element of ERP audits. Implementing recommendations enhances system security and reduces risks associated with data breaches or disruptions.
Adoption
Auditors evaluate how end users are interacting with an ERP system and identify any adoption issues. Addressing flaws in the user experience, insufficient training, or feature gaps can lead to higher user adoption rates.
Efficiency
Inefficient workflows, unnecessary manual procedures, cluttered interfaces, and complex processes can be uncovered through ERP audits. Optimising these areas to increase efficiency allows employees to save time and focus on more value-added tasks.
Conducting a Successful Audit
There are several key steps to conducting a successful ERP audit:
- Clearly define the scope and goals of the audit upfront. Determine which modules, business processes, and systems will be evaluated and what you hope to accomplish.
- Involve key stakeholders from across the organization like system users, process owners, CIO, and other executives. Get buy-in and set expectations.
- Appoint experienced auditors who understand ERP systems and are detail-oriented. Consider third party specialists for an independent perspective.
- Develop a thorough audit plan with detailed steps and a realistic timeline. Define information gathering methods like interviews, observation, and report analysis.
- Gather evidence and carefully document audit findings. Potential issues should be verified with supporting data and documentation.
By following these steps, an audit has a higher chance of identifying areas for improvement, leading to an optimized ERP system and more efficient business processes.
After the ERP Audit
Once the ERP audit is complete, it’s important to review the audit report and determine next steps to address any issues found. The key activities after an audit should include:
Prioritise Issues Based on Severity
Review audit findings and categorise issues based on how severe or critical they are to address. More serious issues related to data integrity, security, or regulatory compliance should take priority for remediation.
Create Remediation Plan
Develop a detailed remediation plan outlining specific steps to resolve problems identified in the audit. This plan should include assigned owners, targeted completion dates, and success metrics.
Implement Recommendations
Carry out the recommendations from the audit report by following the remediation plan. This involves making configuration changes, updating processes, retraining users, or developing custom solutions to address gaps.
Schedule Follow-Up Audits
Plan periodic follow-up audits every 6 or 12 months to validate issues were fully remediated and identify any new areas for improvement. Ongoing audits ensure the ERP system remains optimised over time.
Conclusion
In conclusion, having regular ERP audits leads to improved systems and processes over time. The audit helps identify areas that need optimisation, allowing businesses to enhance data accuracy, boost security, streamline operations, and increase user adoption of the system. It brings a fresh, outside perspective from independent experts. Follow-up audits on a periodic basis then ensure you are able to maintain an optimised system that aligns with business goals and best practices.
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Sources:
https://www.encorebusiness.com/blog/auditing-requirements-after-an-erp-implementation-or-conversion/
https://www.techtarget.com/searcherp/tip/Steps-for-an-ERP-post-implementation-audit
https://www.linkedin.com/pulse/how-erp-systems-audited-penieltech/
https://pathlock.com/learn/7-reasons-why-you-should-audit-your-erp-security/
(https://www.js3global.com/blog/conduct-erp-audit-complete-checklist/