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Oracle EBS R12 General Ledger Configura7ons to Ensure Reliable Financial Statements in 2015

Educational Webinar January 22nd, 2015

Adil Khan Managing Director

www.fulcrumway.com Copyright © FulcrumWay

Oracle EBS R12 General Ledger Configurations to Ensure Reliable Financial

Statements   Introductions

  Oracle General Ledger Controls Overview   Configurations that impact financial close   Assessment Approach for Oracle EBS Controls   Oracle Advanced Controls – A Case Study   Q&A

Agenda


A Leader in Risk Based Controls Management™

FulcrumWay: is the #1 End-to-End Provider of Risk Based Enterprise Controls Management Solutions for Oracle EBS, PeopleSoft and JDE customers with over 200 Fortune-500 to Middle Market clients. Since 2003, we have successfully assisted companies across all major industry segments.

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Proven Expertise





Agenda


Oracle EBS 11i vs R12 Close Process GL Controls Overview

ü User-Configurable Accounting Rules to address the concurrent needs for strong internal controls and diverse accounting treatments.

ü Define, test and validate accounting rules to

mitigate risk of inaccurate journal entries

ü  Launch accounting directly from the transactions window to initiate those last minute journal entries.

ü  Preview the journal with the exact GL accounts that would be impacted by the transaction before you actually post it.

ü  Flag prevents GL manual journals from

posting to them as well as SLA journals from inappropriate subledgers.

ü  informs you of outstanding transactions in

any of the subledgers for the period you are trying to close.

In EBS 11i, Trx, posts directly to GL as Journal Entries.

In EBS R12, SLA creates subledger journal entries before it hits the General Ledger.


Oracle EBS R12 Sub-ledger Transaction Controls

GL Controls Overview

q  Invalid – Accoun.ng errors exist; Fix Errors and re-‐run Create Accoun.ng program

q  Incomplete – Transac.ons can’t be accounted yet; Run Valida.on Program

q  Unprocessed – Transac.on hasn’t been accounted; Run Create Accoun.ng Program

q  Final – Accounted in SLA but not transferred to GL; Run Transfer Journal Entries to GL


Oracle EBS R12 Period-End Close Controls

GL Controls Overview

ü  Close Oracle Payables before you close Oracle Inventory and Oracle Assets.

ü  Close Oracle Payables before you close Oracle Purchasing to account for purchasing accruals at period end.

ü  Close Oracle Cash Management before you close Oracle Receivables, as bank reconcilia.on in cash management will create miscellaneous receipts in Oracle receivables.

ü  Finally, close all the subledgers before we close the General Ledger.


Oracle EBS R12 Import Journals EBS GL Controls


Oracle EBS R12 Concurrent Request: Period-End – AP Trial Balance EBS GL Controls


Period End Reports EBS GL Controls


Oracle EBS R12 Concurrent Request: Create Accounting EBS GL Controls

Check the Subledger Accoun.ng rules that will be invoked by the process. Op.ons: a) Create Final Accoun.ng Post to GL b) Create Final Accoun.ng c) Create DraS Accoun.ng.


Oracle EBS R12 Account Reconciliation EBS GL Controls





Agenda


Configuration Checklist GL Configurations Item Configura7on Control Risk 1 GLDI: Force Journals to Balance"

profile op.on Set to “Yes” Inaccurate journal entries are posted to the GL, resul.ng in misstatements in

account balances. 2 Freeze Flexfield Defini.on Set to “Yes” Changes in key flexfield defini.ons could cause inconsistent transac.on

accoun.ng and data corrup.on issues, resul.ng in misstatements in account balances.

3 Enable Journal Approval Enable Invalid or incorrect journal entries could result in misstatements in account balances.

4 Require Journal Approval Enable Invalid or incorrect journal entries could result in misstatements in account balances.

5 Journal Authoriza.on limits Valid Limits Invalid or incorrect journal entries could result in misstatements in account balances.

6 Freeze Journals Set to “Yes” Unreconciled journals between subledger and General Ledger may occur.

7 The "Method (Sequence Assignment) for Ledgers

“A” (Automa.c) Journal entries might not be entered completely resul.ng in incomplete financial statement.

8 Allow Dynamic Inserts Cross Validate Segments Set to Yes

Set to Yes

Invalid account code combina.ons could result in journals being posted to incorrect general ledger accounts resul.ng in misstatements in account balances.

9 Security Rule and Security Rule Elements

Define Security Rule Elements

Transac.ons may be processed by users against account segments they are not authorized to process in resul.ng in account misstatements.


Configuration Checklist GL Configurations Item Configura7on Control Risk

10 MRC: Maximum days to roll forward conversion. Define Currency conversion rates may become outdated and incorrect, resul.ng in misstatements in account balances.

11 Freeze Rollup Groups Yes Changes to Rollup Groups would affect how individual chart of account values, used within journal entries, are consolidated for financial statement repor.ng.

12 GL: Income Statement Accounts Revalua.on Rule profile

Define Income statement accounts may not be appropriately revalued each period, causing gain or loss amounts to be inaccurate.

13 Budgetary Control Enabled Yes Ledgers may not be included in the budget process causing budget monitoring to be non-‐existent.

14 GLDI: Converted Entry Threshold Define An Excessive Threshold amounts might lead to inaccurate pos.ngs to GL.

15 Flexfields:Validate On Server profile op.on Yes Inaccurate journal entries are posted to the GL, impac.ng the accuracy of financial repor.ng.

16 SLA: Enable Data Access Set Security in Subledger profile op.on.

Yes Transac.ons could be processed resul.ng in poten.al misstatement of accounts.

17 GL: Number of formulas to validate for each MassAlloca.on batch" profile op.on "GL: Number of formulas to validate for each Recurring Journal batch" profile op.on

Define Mass Alloca.ons and Recurring Journals may not be processed accurately and inappropriate formulas may be used.


Configuration Checklist GL Configurations Item Configura7on Control Risk

18 SLA: Enable Subledger Transac.on Security in GL" profile op.on was set to "No" at the site and organiza.on levels.

Set to “Yes” Subledger transac.ons can be accessed by unauthorized users through General Ledger responsibili.es.

19 "Access Set Type" Full Inappropriate configura.on and assignment of defini.on access sets may result to invalid journals being posted.

20 Default Average Rate Type and Default End Rate Type were not defined. Define Adjustments from currency transla.on or revalua.ons may

not be appropriately accounted for, resul.ng in inaccurate financial reports.

21 GL Rollup Groups Define Inappropriately defined rollup groups may provide management with inaccurate summary informa.on.

22 Super User Defini.on Access Set Define If defini.on access sets are not appropriately designed, inappropriate users may gain access to sensi.ve func.onality. This could result in financial misstatement.

23 Segment Value Qualifiers Define If pos.ng is not restricted, users can post journals direct to General Ledger accounts. This can lead to unreconciled differences between the subledger and the general ledger.

24 Period Status Open current period

All prior and future accoun.ng periods (except the current period) should have a status of Closed.

25 Enable Security configura.on for all accoun.ng calendars, autopost criteria sets, COA mappings, and journal reversal criteria sets.

Set to Yes If defini.on access sets are not appropriately designed, inappropriate users may gain access to sensi.ve func.onality. This could result in financial misstatement.

26 The Reversal Period for different journal reversal categories.

Define Journal entries may be reversed in an inappropriate period affec.ng cut off in the financial statements.





Agenda


A Risk Based Approach Controls Management

Detect/ Analyze Findings

Implement Corrective

Actions (AC/ERP)

Monitor Application

Controls (OAC)

Scope

Application Controls

Sample ERP Data

Manage Exceptions

Setup Mitigating Controls

(CC/PC/TC)

Risk Advisors/ ERP Managers/ Control Owners

Risk Advisors/ Control Owners

Control Owners/

ERP Managers

Establish Test

Environment DataProbe Controls Catalog

Controls Workbench

Advanced Controls Experts/

ERP Managers

Risk Assessment


Enterprise Close Process is Complex

Monitor Financial Close Controls

Sub Ledger Close General Ledger Close

Data Assurance Consolida.on Internal

Repor.ng External Repor.ng Filling

Close PO Close Project Billing and Costing Run post process for PO, Projects, etc Close AR sub ledger Close AP sub ledger Close Inventory sub ledger Close HCM sub ledger Close Assets sub ledger Run revaluation/re-measurement Run GL post process for AP,AR, FA, etc.

Reconcile sub ledgers to GL Reconcile Bank Accounts Reconcile all accounts Approve adjustments Clear suspense accounts Post accruals Run allocations

Gather non actuals data from reporting (lease, credit line, headcount, plan, etc) Gather and validate complete data sets to support all financial reporting needs (i.e. Legal Entity, Segments, Management, Tax, Sustainability Metrics, Tax, etc

Run summary allocations Run consolidation to summary ledgers Make Topside Entries Run reports for FASB Run reports for KPI’s Run reports for FX Run reports for Retained Earnings

Run period-end management reports Review reports for business performance and realignment

Generate external reports Compile Disclosure Items Gather other financial information

Deliver XBRL/Edgar filings to the SEC Deliver statutory filings such Tax

Risk Assessment


Enterprise Close Process is Complex

Monitor Financial Close Controls

Sub Ledger Close General Ledger Close

Data Assurance Consolida.on Internal

Repor.ng External Repor.ng Filling

Close PO Close Project Billing and Costing Run post process for PO, Projects, etc Close AR sub ledger Close AP sub ledger Close Inventory sub ledger Close HCM sub ledger Close Assets sub ledger Run revaluation/re-measurement Run GL post process for AP,AR, FA, etc.

Reconcile sub ledgers to GL Reconcile Bank Accounts Reconcile all accounts Approve adjustments Clear suspense accounts Post accruals Run allocations

Gather non actuals data from reporting (lease, credit line, headcount, plan, etc) Gather and validate complete data sets to support all financial reporting needs (i.e. Legal Entity, Segments, Management, Tax, Sustainability Metrics, Tax, etc

Run summary allocations Run consolidation to summary ledgers Make Topside Entries Run reports for FASB Run reports for KPI’s Run reports for FX Run reports for Retained Earnings

Run period-end management reports Review reports for business performance and realignment

Generate external reports Compile Disclosure Items Gather other financial information

Deliver XBRL/Edgar filings to the SEC Deliver statutory filings such Tax

Numerous ERP modules involved (INV,OM, AP,AR,GL) Control interdependencies

between applications and departments

Interdependent processes that must run in parallel

Large volume of incomplete transactions in interface tables

must be manually resolved

Large volume of incomplete transactions in interface tables

must be manually resolved

Lack of issue identification and remediation

Coordination of key personnel

Simultaneous audit of the close,

during the close

SOX certifications should precede financial reporting

Compressed reporting period

Penalties for late reporting

Steps must be completed in the right order

Difficult to see bottlenecks within critical

Lack of time for internal due diligence

Risk Assessment


Reconciliation requires clear communication and effective collaboration

Account Reconciliation

Executives Administrators

Auditors

Preparers & Reviewers

Risk Assessment


Reconciliation requires clear communication and effective collaboration

Account Reconciliation

Executives Administrators

Auditors

Preparers & Reviewers

Lack of insight – Are there any surprises during account reconcilia.on?

Lack of real .me status.

Too much .me for audit & review

Missing work papers on key account balances

Disconnected control tes.ng – redundant efforts

No standard defini.on for “reconciled”.

Account Reconcilia.on not based on Risks such as poten.al for fraud or

misstatement, turnover, account history, materiality, volume of transac.ons, significant judgment, need for regular manual pos.ng or adjustments, etc

Delinquent reconcilia.ons – No Ac.on plan for Account owner to remediate

delinquent reconcilia.ons

Risk Assessment





Agenda


Global Fortune 500 Industrial Leader Ensures Reliable Financial Statement with Advanced Controls

Our Client   Founded in 1883, today a global supplier of paints,

coa7ngs, op7cal products, specialty materials, glass and fiber glass

  Employs more than 40,000 people worldwide   Generated over $15B in revenue last year   External Auditor PWC.

Challenges   Reduce costs and “audit fa7gue” related to

management controls   Reduce risk associated with the current state highly

manual, fragmented process   Need Enterprise-‐wide visibility into the Financial Close

Controls and Compliance processes   Leverage investments in technology to provide a

founda7on for global management controls

Solu7ons   Oracle EBS R12, Advanced Controls Suite   FulcrumWay Risk Advisory, Smart Controls and

Dataprobe. Successes   Reduced audit findings by 70% and remedia7on

effort by 80% by configuring and tes7ng ERP controls

  Improved management visibility into financial close controls by providing real 7me repor7ng on GL Controls across the regions.

  Reduced financial misstatement risk by replacing manual, spreadsheet based error-‐prone process with automated controls

  Streamlined financial close steps be ensuring period end tasks are performed according to journal dependencies checklist

Case Study


Case Study Record to Report Process Flow


Standard + Advanced Controls

Financial Roles

Sub-Ledger Accounting

Journal Import

Generate Close Tasks

Manual Journal Entry

Approvals Prevent access to sensitive setups

Notify Account

Fluctuations

GL Transaction Threshold

Transaction Risks

Fine-grained

User Access

Configuration Snapshots & Audit Trial

Risk Based Account Analysis

Fuzzy Logic, ‘similar values’

Advanced Controls

Standard Controls

Approval Hierarchies

Journal Sources

Advanced Controls


Flow Controls generate close tasks and prevent close errors

Advanced Controls


Transaction Controls Detect unusual Journal Entries

Advanced Controls


Monitor Key Configurations in ERP Advanced Controls

  Query a change tracker to identify changes across multiple instances.

  Select multiple applications to monitor

  Query requires Change Tracking Transfer program to run before any data can be collected. (This program transfers change tracking data from the ERP instances to CCG.)


Monitor Key Configurations in ERP Advanced Controls


Case Study Task Management Dashboard


Case Study Results and Benefits


Leverage Advanced Controls for Oracle EBS R12 to streamline your Record to Report

process   Introductions

  Top Financial Close Challenges   Overview of Financial Controls   Advanced Controls for Record to Report   Case Study   Q&A

Agenda


Leader in Risk Based Management Controls Q & A

fulcrumway - ed. webinar - oracle ebs r12 general ledger configurations to ensure reliable financial...

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