Accounting Information Systems: The Processes and Controls, 2nd Edition

ERP SYSTEMS AND THE SARBANES–OXLEY ACT (STUDY OBJECTIVE 8)

Referring back to Exhibit 15-3, you will notice that within the financials module, there is a section entitled “Corporate Governance.” Since the passage of the Sarbanes–Oxley Act of 2002, ERP systems have been enhanced to include functions that assist management in complying with sections of the Act. For example, Section 404 of the Act requires assessment of internal controls. An internal control report is required to accompany each financial statement filing. The internal control report must establish management's responsibility for the company's internal controls and related financial reporting systems. It must also include an assessment of the effectiveness of the company's internal controls and related financial reporting systems. If there are any weaknesses in internal controls, they must be disclosed in this report.

Enhanced ERP systems provide feedback information to management regarding internal controls. To effectively use this function of an ERP system, there are important steps the company should accomplish:

1. Establish and maintain a list of incompatible duties. These incompatible duties are often called conflicting abilities. For example, proper segregation of duties should not allow an employee to both approve purchases and record or approve goods received at the receiving dock. A company must review all of the possible activities conducted by employees within the accounting system and catalog the list of conflicting ...