1) Reading Review Questions

1) Reading review questions

a) What is the distinguishing characteristic of e-business that makes it different from traditional brick and mortar businesses? The differentiating characteristic is the presence of a computer network.

b) The chapter discusses five basic types of e-business arrangements. Identify and describe each one; give an example of each type other than the example in the chapter. B2C--business to consumer—Amazon.com. B2B—business to business—Irwin / McGraw-Hill Publishing. G2C—government to consumer—City of Los Angeles. G2B—government to business—California Franchise Tax Board. C2C—consumer to consumer—Craig’s List.

c) What is an enterprise resource planning system? An enterprise resource planning system is a sophisticated relational database; it captures comprehensive data related to many different business processes.

d) What common problems cause ERP implementations to fail? What can managers do to promote successful ERP implementations? The chapter discusses ten common problems that lead to ERP failure: poor leadership from top management, automating existing redundant processes, unrealistic expectations, poor project management, inadequate education and training, trying to maintain the status quo, bad match between software and processes, inaccurate data, “IT project” view, and significant technical difficulties. Successful implementations can be promoted by: obtaining organizational commitment, communicating strategic goals clearly, viewing the project as an enterprise-wide venture, selecting a compatible system, resolving multi-site issues and ensuring data accuracy.

e) Prepare a response to the questions for this chapter’s opening vignette.

i) What is selective outsourcing? In general, outsourcing refers to hiring a firm to provide a specific service; in this case, human resources administration. As the name implies, selective outsourcing implies that managers don’t necessarily “hire out” the entire HR function. Rather, they choose which pieces to outsource.

ii) What is an enterprise resource planning system? How does it benefit organizations? ERP software provides a comprehensive vehicle for managing organizational information; it is typically modular in nature, and has many of the same benefits as relational database software.

2) Reading review problem

a) Visit Hershey’s web site. Discuss the corporation’s involvement in e-business. Hershey is involved in B2C e-business; it sells products to consumers via its web site. The site also provides recipes and other information.

b) Explain the purpose and nature of enterprise resource planning software, referred to in the article as “enterprise client / server software. ERP software is a modular relational database application that provides organizations with more comprehensive information than other types of software. Common modules in an ERP system include: customer relationship management, human resource management, financial management and supply chain management.

c) What factors may have contributed to Hershey’s problems with Enterprise 21? Of the ten major causes of ERP implementation failures identified by Umble and Umble, the following seem particularly applicable to the situation at Hershey:

i) Poor leadership from top management.

ii) Unrealistic expectations.

iii) Poor project management.

iv) Inadequate education and training.

v) A bad match between ERP software and organizational processes.

vi) ERP implementation viewed as an IT project.

vii) Significant technical difficulties.

d) In 2002, Hershey announced an upgrade to its ERP system using SAP; the upgrade was both ahead of schedule and under budget. Visit www.SAP.com. Is SAP an application service provider? Explain your response. SAP is an application service provider; it may be classified as either an Enterprise ASP and / or a Specialist ASP. Its software applications add value to organizations in many areas, including finance, operations, marketing and human resources.

3) Making choices and exercising judgment

a) Consider this chapter’s opening vignette. In the blinding light of hindsight, which of the common causes of ERP failure did Hershey experience? What could management have done to avoid those problems? Common causes: seeing the project as an IT venture, rather than an organizational commitment; poor project management; inaccurate data; unrealistic expectations. Management needed to start with an overall education process throughout the company; a multi-disciplinary team should have laid out a realistic plan for ERP implementation. And, perhaps most importantly, the old system should have been maintained until the new system was fully functional.

b) The e-business model can be applied very effectively in some industries, but not as effectively in others. You may remember early attempts to establish online grocery shopping with companies like Web Grocer and Net Grocer. Think of another industry where the value of e-business might be considered questionable. Explain your reasoning. Any business where human contact is important would be questionable for an e-business environment. As I’m writing this, my basset hound is sleeping on the sofa—ventures like dog grooming or pet sitting wouldn’t be good choices for e-business.

c) Chapter 9 discussed a weighted rating model for software evaluation. If you were using such a model to evaluate ERP systems, what factors would you want to consider? What relative weights would you assign each of them? Explain your choices. Cost (weight = 5), vendor reliability (weight = 5), quality & availability of training materials (weight = 4).

4) Field work

Because the field exercises involve original research and will vary significantly from student to student, I’m not including any suggested solutions to them. If your students produce particularly outstanding responses and you’d like to send them to me, I’ll post them on the book’s web site. Let me know if this lack of suggested responses to field exercises is a major inconvenience for you.

5) Internal controls in e-business

The chapter mentioned three potential internal controls for an e-business environment: encryption, segregation of duties and access restrictions. Consider your study of internal controls throughout this text; suggest five additional internal controls for e-business environments. Explain specifically how you would apply them.

· Password rotation. Employees should be required to change their passwords periodically—perhaps every six months.

· Password composition. Passwords should be “strong.” They should incorporate upper- and lower-case letters, as well as digits. They should be at least eight digits long, and not comprise words you’d find in a dictionary.

· Adequate documentation. Steps for common business processes should be developed with user consultation and documented.

· Daily file back-ups. All data should be backed up at the end of each business day on a secure server or other media.

· Virus protection. Software should be installed to promote data integrity.

6) Types of computer networks

As you read in the chapter, the presence of a computer network is the defining characteristic of e-business. Research the topic and define each of the following terms related to networks and networking. The definitions below come from www.wikipedia.com.

a) Local-area network: A Local Area Network (LAN) is a computer network covering a small local area, like a home, office, or small group of buildings such as a home, office, or college.

b) Network architecture: In computing, network architecture is the design of a computer network.

c) Network protocol: The set of standard rules for data representation, signaling, authentication, and error detection required to send information over a communications channel.

d) Network topology: A network topology is the pattern of links connecting pairs of nodes of a network.

e) Node: A node is a device that is connected as part of a computer network. Nodes can be computers, personal digital assistants (PDAs), cell phones, or various other network appliances, such as routers, switches, and hubs.

f) Server: In information technology, a server is a computer system that provides services to other computing systems—called clients—over a network. The term is most commonly applied to a complete computer system today, but it is also used occasionally to refer only to the hardware or software portions of such a system

g) Wide-area network: A wide area network or WAN is a computer network covering a wide geographical area, involving a vast array of computers.

7) Forms of e-business

Which category of e-business (B2B, B2C, G2B or G2C) best describes each of the following items?

a) Buying materials for professional practice from www.aicpa.org: B2B

b) Electronic reporting of state unemployment taxes: G2B

c) Filing personal income taxes with TaxSlayer.com: B2B and G2C

d) Getting medical advice from www.webmd.com: B2C

e) Making appointments with the Department of Motor Vehicles: G2C

f) Online banking: B2C or B2B

g) Paying traffic citations online: G2C

h) Purchases from Amazon.com: B2C

i) Receiving the online newsletter from the Institute of Management Accountants: B2C

j) Registration for seminars sponsored by the Association of Certified Fraud Examiners: B2C

8) Causes of ERP failure

Fill in the blanks below with appropriate terms related to the causes of ERP failure

a) Unrealistic expectations

b) A bad match between ERP software and organizational processes

c) Automating existing redundant or non-value-added processes in the new system

d) ERP implementation is viewed as an IT project

e) Inaccurate data in the system

f) Inadequate education and training

g) Poor project management

h) Poor leadership from top management

i) Significant technical difficulties

j) Trying to maintain the status quo

9) Promoting ERP success

Choose one or more of the organizations listed below (or another specified by your instructor); investigate it on the Internet and through your University’s library. Work with a group of students to prepare a PowerPoint presentation to fulfill the first three of Umble and Umble’s six conditions for promoting ERP success (obtain organizational commitment, communicate strategic goals and view ERP as an enterprise-wide venture). Here’s an example based on Yankee Candle Company (continued on the next page).

10) Application service providers

a) Companies considering utilizing an ASP might start the process by identifying a need to lower costs and increase flexibility. What other steps would a manager likely take in selecting an ASP? Who should be involved in such a decision? After needs identification, organizations might:

i) Write a request for proposal which identifies the purpose of and specifications for potential ASPs.

ii) Select a committee to evaluate the proposals. The committee should include members with backgrounds in information technology and accounting; it should also incorporate the people who will actually be using the ASP.

iii) Develop an objective set of evaluation criteria for the proposals.

iv) Evaluate the proposals using the criteria; select a small number for further consideration.

v) Arrange interviews and / or demonstrations of the finalists.

vi) Contact clients of the finalists to get their points of view.

vii) Select an ASP.

b) Refer to www.sas70.com to determine which of the following statements are true about service audits conducted under that standard.

Not true
True
True
Not true
True
True
Not true
True
True
True

c) All professional accounting certifications and licenses (such as the CPA and CFE) require continuing professional education (CPE) on an annual basis. Suppose you and a group of friends started an ASP designed to track CPE requirements for accounting professionals. Design a database that would capture the required information about your clients. What internal controls would you implement to promote the integrity of those data? The database would include at least two tables. The first would contain client names and identification information (name, address, phone); it could also include licenses and certifications. The second table would incorporate the primary key from the client table and details about CPE units completed, such as subject, source and number of hours. Internal controls would likely include password protection and backing up files daily.

11. Crossword puzzle

Please complete the crossword puzzle below using appropriate terminology from the chapter.

12. Terminology

Please match each item on the left with the best item on the right.

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1. B

2. J

3. G

4. F

5. E

6. C

7. H

8. D

9. A

10. I

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13. Multiple choice questions

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14. Statement evaluation

Indicate whether each of the following statements is (a) always true, (b) sometimes true or (c) never true. Explain your responses for those that are sometimes true.

1. Companies involved in e-business report higher profit margins than traditional companies. B—e-business doesn’t necessarily lead to higher profit margins.

2. Computer networks are the defining feature of e-business. A

3. E-business expands an organization’s geographic markets. B—it can, but doesn’t necessarily do so in every case.

4. E-business removes the need for human intervention in accounting information systems. C

5. Every aspect of Porter’s value chain can be impacted by e-business. A

6. Implementing an ERP system ensures that data will be accurate and accessible. C

7. Many enterprise resource planning systems are modular in nature. A

8. Organizations enter into relationships with stakeholders to get the resources they need to operate. A

9. Successful ERP implementations often require business process redesign. A

10. WebTrust and SysTrust can strengthen internal controls in e-business. A

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