Presentation on Audit under SAP Environment By : CA Archit Shah (SAP FI Consultant)

1. Presentation on Audit under SAP Environment By : CA Archit Shah (SAP FI Consultant)

2. Objective Provide participants with an overview of the necessary aspects needed to understand general SAP concepts, and obtain usable data extractions from SAP for the purpose of serving an Audit

3. What is SAP? • It is SAP and not SAP • In German... Systeme, Anwendungen, Produkte in der Datenverarbeitung • In English... Systems, Applications & Products in Data Processing

4. Cont…. • IT’S AN APPLICATION DRAWING DATA FROM DBMS (Database) • CONFIGERATION IS VERY EASY AND FLEXIBLE • ITS’ CLASSED AS AN ERP SYSTEM • SECURITY AUTHORIZATION CAN BE DONE AT DIFFERENT LEVELS AND IS VERY COMPLEX AS WELL AS EASY • APPLICATION PROGRAM – CONTROLS RECORDING UPDATING AND READING DATA FROM DATABASE IN REAL TIME

5. SAP and ERP Enterprise Resource Planning (ERP) An information system designed to integrate and automate the business functions of medium and large companies Purchasing Manufacturing Distribution Personnel Financials & Controlling Slide 5

6. ERP Major Players • SAP • Oracle / Peoplesoft • SSA (BAAN/Marcam) • Microsoft Dynamics

7. SAP -R/3 Enterprises - Application components SD MM PP CO FI ERP AM QM PS PM WF HR IS

8. SAP R/3 –Architecture -3 Layers Presentation Layer - SAP R/3-S/W-GUI with which users interact - Application Servers-with SAP R/3 Kernel that run ABAP programs (WIN 2003/Server Pack 1/Windows 8) Application Layer • RDBMS -ABAP/4 Dictionary, source &executable program. • T-codes = 120314 • - Database Tables =35650 Data Base Layer

9. Learn the Lingo • DOC Type • DOC Number • Goods Issue (GI) • Goods Receipt GR) • GRIR Account • Intermediate Document (Idoc) • Work Breakdown Structure (WBS) • Assets Under Construction (AUC)

10. Learn the Lingo (cont’d) • Stores Inventory • Advanced Business Application Program (ABAP) • Audit Information System (AIS)

11. SAP R/3 Overview • System Architecture • Business Process Overview • System Modules • Standard Tables • Document Structure • ABAP Functionality • Audit Information System (AIS) Overview

12. SAP Architecture Legacy Separate ledger for A/P transactions Differentiate transactions by GL Account One entry contains all relevant information SAP All transactions are included in one ledger Differentiate transactions by document type Relevant information recorded in multiple documents VS

13. SAP Architecture (cont’d) The basic structure of SAP is fundamentally different from that of a legacy system. SAP Legacy Materials Mgmt Accounts Receivable Accounts Payable Inventory Sales General Ledger Asset Mgmt Finance Purchasing Inventory General Ledger

15. SAP Advantages • One central database • Real time processing • Allows integration of legacy systems • Document Balancing • Manages Work flow

16. SAP Business Processes Know that over 1,200 business processes can be defined by SAP! • Highly flexible • Customized to fit Company • Can Choose implementation of -Modules -Business processes -Import of Legacy/External Data

17. SAP Business Processes …Therefore every SAP installation is different! • Have clear understanding of business • Processes that are effected by SAP • Document Types Used • Data Integrity (Is it SAP created?) • Data Reconciliation (Tolerances)

18. SAP R/3 Modules • CO – Controlling -Plants, Chart of Accounts, Customer/Vendor Masters • FI - Financial Accounting -Financials, G/L, A/P, A/R • SD - Sales and Distribution (Orders, Invoicing,EDI) -Orders, Invoicing, EDI • AM - Asset Management -AUC account from A/P transactions • MM - Materials Management -Procurement for Production and Consumption • PS - Project System (Construction Contractors)

19. SAP Tables-General • Master Tables Chart of Accounts Customers Vendors Employee • Transactional data Sale Invoices (A/R) Purchases (A/P) Inventory Movements (MM) Assets (AM)

23. Requisition Purchase Order Tax Calculation Tax is estimated on the Purchase Order Goods Receipt (optional) Tax is expensed at Goods Receipt Invoice Receipt Tax Calculation Tax is paid or accrued at Invoice Receipt Payment to Vendor Purchase Order Invoices

24. Purchase Order Invoice Example 1Use Tax Accrued (No tax on vendor invoice) Goods Receipt Material 100.00 - Cenvat Clearing 12.36 - GR/IR Clearing - 112.36 Invoice Receipt GR/IR Clearing 112.36 - Vendor ABC Company - 112.36 Excise Credit Cenvat Receivable 10.00 - E.Cess 2.00 - Hcess 1.00 - Cenvat Clearing - 12.36

25. Purchase Order Invoice Example 2Tax Paid to Vendor (Amounts include estimated tax) • Goods Receipt • 678910 Supplies 100 • 210090 GR/IR Clearing (100) • Invoice Receipt • 210090 GR/IR Clearing 100 • 323456 Vendor ABC Company (100)

26. Purchase Order Invoice Example 1Price difference Goods Receipt Material 100.00 - Cenvat Clearing 12.36 - GR/IR Clearing - 112.36 Invoice Receipt GR/IR Clearing 112.36 - Vendor ABC Company - 111.36 Rate Difference/Material - 1.00 Excise Credit Cenvat Receivable 10.00 - E.Cess 2.00 - Hcess 1.00 - Cenvat Clearing - 12.36

27. Invoice Receipt Tax Calculation Tax is paid or accrued at Invoice Receipt Payment to Vendor Non-Purchase Order Invoice Tax Paid to Vendor (Amounts include estimated tax) Invoice 678910 Supplies 10.83 323456 Vendor ABC Company (10.83)

28. Non-Purchase Order Invoice Example 2Use Tax Accrued (No tax on vendor invoice) Invoice 678910 Supplies 10.83 323456 Vendor ABC Company (10.00) 193010 Tax Accrual (0.63) 193010 Tax Accrual (0.10) 193010 Tax Accrual (0.10)

29. SAP Tables-Examples • Sales Tables Customer Master (KNA1) Sales Document Header (VBAK) Sales Document Line Items (VBAK) Billing Header Data (VBRK) Billing Line Items (VBRP) • A/P Tables Vendor Master (LFB1 and LFA1) PO Order Info (EKKO and EKPO) Goods Receipt Line Items (EKBE) Payables G/L Line Items (BKPF and BSEG)

30. Audit Challenge Challenges in SAP that don’t exist in other systems! To overcome these challenges • Understand SAP document types • Specific Number Ranges apply to each • Specific G/L Accounts mapped to each Doc Type AP Doc Types KA-KZ (vary by company) KI-Interface (Legacy/P-Cards) KN and/or RN-Non PO (aka Net Invoice) KR and/or RE-PO issued

31. Audit Challenge (cont’d) Sales Doc Types SA-SZ* S1-S9* *Will vary by Sales Channel / Revenue Source Other Document Types (MM, Stores Inventory) WA-Goods Issue WE-Goods Receipt Used for Prepaid Expense Inventory Tracking Goods receipt document contains link to Vendor and A/P transaction info!

32. R/3 Financials(Financial Accounting -FI Module) • General Ledger Central pool of financial data Real-time update of sub-ledgers and GL • Special purpose Ledger User created combinations of entered data Generate data summaries for planning, allocation, distribution Cost center accounting

33. R/3 Financials(Financial Accounting -FI Module) Accounts Receivable and Payable – Sub-ledgers Integrates with GL Sales and Distribution Materials Management. Vendor and Customer information Payment automation (EFT and check processing)

34. R/3 Financials(Financial Accounting -FI Module) Asset Accounting Subledger - (FI-AA) Captures asset related transactions Country-specific depreciation charts Compliance with local legal requirements

35. R/3 Financials(Financial Accounting -FI Module) Asset Accounting Sub-ledger - (FI-AA) Follows asset life cycle requisition to retirement integration with Plant Maintenance component to manage -machinery and equipment -leased assets and assets under construction Provides for interactive reporting

36. Lessons Learned • PO Purchases vs. Non PO • GR/IR Transactions • Assets under Construction • Multi Location Purchases • MM Docs (Stores Accounts) • EDI(Electronic Data Interface)

37. Methods for Data Evaluation • ABAP (standard reports) • Query (individual inquires) • All downloadable Unconverted text Excel Word (Rich Text) HTML Print Files

38. Audit In SAP • System Audit System functions • Business Audit Accounts Financial Statements Assets Liabilities P & L

39. Business Audit • Balance Sheet • P&L • Accounts • Vouchers • SD,FI, MM, PP, HR , CO

40. Control Compliance • Parked Document • Allows for entry and storage of an unfinished document in the system. A “parked” document is pending posting (No financial Effect and used for dual controlling) and once it is posted by authorized person document is posted with the same document number.

41. Cont… • Hold Documents Same as Parked documents but the same can be posted by the same person who have put the document on hold. Once it is posted new document no is generated. • Posted Documents Once the document is posted it effects the financials of the company.

42. Cont.. • While doing audit auditor must take special care about the document which are put on parked / hold and find out the reason about the same. • Auditor should also see that the document which were parked/hold and later on posted the duration between these two as it should not be longer and if so then ask the reason about the same.

43. SAP R/3 T-codes with Screen • Let’s See some Screen Shot for SAP R/3 with their T-codes which are useful for conducting the Audit work

44. SAP R/3 Document Display

45. Click on the “Display Document Header” 4th icon (Hat) to view document audit trail.

47. Cont… • You can compare it with Organizational hierarchy of Authority and responsibility (Who is authorized to approve the document and who had entered and posted the document). • You can also view that the period open till what date and whether it is Approved by the management that the period should be open for such time.

48. General Ledger Line item view (T-code : Fbl3n)