Control or chaos: impact of workarounds on internal controls

Aimee Pernsteiner, Dawna Drum and Adam Revak

International Journal of Accounting & Information Management, 2018, vol. 26, issue 2, 230-244

Abstract: Purpose - There have been many studies that investigated the causes of workarounds, but there is less research on their outcomes, such as the impact on internal control. This study aims to investigate the use of workarounds by a multinational organization that implemented SAP about 10 years ago, and how those workarounds affected internal controls. Design/methodology/approach - A qualitative study is performed by analyzing interviews with company personnel for a multinational organization. Employees selected for interviews are primarily users of SAP’s accounting functions. Findings - Workarounds have significant impacts on the internal controls over financial reporting. Workarounds cause compensating controls to be implemented, which are often manual in nature, and decrease the organizational efficiency and effectiveness. Research limitations/implications - Workarounds become integrated into an organization’s activities to meet its business needs. This research raises questions to determine when maintaining organizational efficiency and control outweighs the need to provide customer service and other business needs. Practical implications - Companies should consider whether their business processes can be modified to ensure that they can be handled within the enterprise system. In addition, the number of compensating controls required due to workarounds may decrease the organizational efficiency expected from having an enterprise resource planning system to ensure the integrity of financial information. Originality/value - This paper moves beyond finding the causes of workarounds, and expands what is known about workarounds and their impact on an organization. An important contribution of this study is to consider the intersection of workarounds, ERP systems and internal controls.

Keywords: Internal control; SAP; Workarounds; ERP systems (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijaimp:ijaim-12-2016-0116

DOI: 10.1108/IJAIM-12-2016-0116

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