Systems Techniques and Documentation

Chapter 2

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Learning Objective 1

Characterize the use of systems techniques by auditors and systems development personnel.

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Users of Systems Techniques

Systems techniques are tools.

Analysis

Design

Documentation

They are largely graphical (pictorial) in nature.

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Use of Systems Techniques in Auditing

What are the two basic components of an auditing engagement? 1. The interim audit 2. The financial statement audit Substantive testing
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Compliance testing

2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood

Internal Control Evaluation

Auditors are typically concerned with the flow of processing and distribution of documents within an application system.

Auditors use charts to analyze the distribution of documents in a system.

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Compliance Testing
Compliance testing requires an understanding of the controls that are to be tested. Auditors must have a basic understanding of systems techniques. input-process-output (IPO) hierarchy plus input-process-output (HIPO) logical data flow diagrams (DFD)
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Working Papers

These are the records kept by an auditor of the procedures and tests applied, the information obtained, and conclusions drawn during an audit engagement. Required by professional standards

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Working Papers
What are some of the systems techniques used by auditors to document and analyze the content of working papers?

internal control questionnaires analytic flowcharts system flowcharts branching and decision tables
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Use of Systems Techniques in Systems Development

What are the three phases of a systems development project? 1. Systems analysis

2. Systems design
3. Systems implementation
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Systems Analysis
Much of a systems analysts job involves collecting and organizing facts. Systems techniques examples:

Interviewing
Document reviews

Observations
Matrix
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2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood

Systems Design
A blueprint must be formulated for the complete system. Input/output (matrix) analysis

Systems flowcharting
Data flow diagrams
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Systems Implementation
Systems implementation involves the actual carrying out of the design plan. What systems techniques serve as a documentation tool? Program flowcharts Decision tables
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Learning Objective 2

Describe the use of flowcharting techniques in the analysis of information processing systems.

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Systems Techniques

What is a flowchart? A flowchart is a symbolic diagram that shows the data flow and sequence of operations in a system.

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Basic Symbols
Input/output Process Flowline

Annotation
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Specialized Input/Output Symbols

Punched card Online storage Magnetic tape

Punched tape Magnetic disk

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Specialized Input/Output Symbols

Document Communication link Offline storage

Manual input

Display
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Specialized Process Symbols

Decision Predefined process Preparation Auxiliary operation Merge Extract

Manual operation

Collate

Sort
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Additional Symbols
Connector Transmittal tape

Off-page connector

Terminal

Parallel mode
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Symbol Use in Flowcharting

Symbols are used in a flowchart to represent the functions of an information or other type of system. Normal direction of flow is from left to right and top to bottom. Open arrowheads should be used on reverse-direction flowlines.
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Symbol Usage Illustration

Normal Direction of Flow
Invoice Review and approve

Approved invoice

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Symbol Usage Illustration

Reverse Flow Shown with Arrowheads

Approved invoice

Review and approve

Invoice

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Symbol Usage Illustration

Use of Connector Symbol
Stores
Approved invoice

Purchasing

Invoice

A
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Symbol Usage Illustration

Bidirectional Flow Shown with Arrowheads
Requisition
Prepare purchase order and update vendor files

Vendor files

Purchase order
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Learning Objective 3

Define common systems techniques, such as HIPO charts, systems flowcharts, and logical data flow diagrams.
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IPO and HIPO Charts

These charts are used primarily by systems development personnel. At the most general level of analysis, only the basic input-process-output relations in a system are of concern. Additional processing detail is provided by hierarchy plus input-process-output.
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IPO Chart

System: Payroll Author: Mr. Foxx Description: Calculate Gross Pay Chart Number: 3.1 Input Process

Date: 6/9/0X Output

Payroll job record Payroll master file

Accumulate hours Gross pay records worked Payroll master file Find correct pay rate Error messages Compute gross pay

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HIPO Illustration
1.0

Payroll system
2.0 3.0 4.0

Data preparation

Processing

Review

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HIPO Illustration
3.1 3.2

Calculate gross pay

3.11 3.12

Calculate net pay

3.13

Accumulate hours worked

Find correct pay rate

Compute gross pay

Each numbered module would be detailed in an IPO chart.

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Systems and Program Flowcharts

A systems flowchart identifies the overall or broad flow of operations in a system. A program flowchart (block flowchart) is more detailed concerning individual processing functions.

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Logical Data Flow Diagram Symbols

Name Terminator
Process Data store Data flow

Symbol

Meaning Represents sources and destinations of data

Task or function being done A repository of data

Communication channel
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2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood

Data Flow Diagram

Timekeeping

Payroll data

Process payroll data

Paychecks

Employees

Payroll data

Payroll details

Payroll Data
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Data Flow Diagram Expanded

Current status

Employee data

Timekeeping

Payroll data

Verify payroll data

P1

Data valid

Valid payroll data

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2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood

Data Flow Diagram Expanded

Employee data
Net pay and deductions

Data to process

Calculate Paychecks pay

P2

Employees

Valid payroll data

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Data Flow Diagram Expanded Further

Update employee files
Current amounts

Process payroll journal

Details

Journal data

Net pay and deductions

Compute net pay

Paychecks

Employees

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Analytic, Document, and Forms Distribution Flowcharts

An analytic flowchart is similar to a systems flowchart in level of detail and technique.

A document flowchart is similar to an analytic flowchart but contains less detail about the processing functions of each entity shown on the chart.
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Analytic, Document, and Forms Distribution Flowcharts

The forms distribution chart illustrates the distribution of multiple copy forms with an organization.
Purchase
Receive

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Analytic Flowchart
Purchasing
Approve vendor list Select vendors

Suppliers

Prepare quotation requests Requests for quotation

Requests for quotation

Quotations

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Analytic Flowchart
Purchasing
Quotations

Suppliers
Quotations

Select bid

Prepare purchase order Purchase order Purchase order

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2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood

Document Flowchart
Controller
Accounts Payable Purchase requisition 2 To Vendor

Vice President Manufacturing

Purchasing Agent Purchase requisition 1 Purchase order 1 2 Receiving Stores Purchase requisition 1 2 Purchase order 3

Purchase order 5

4
5

Purchase order 4

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Forms Distribution Chart

Purchasing Purchase order copy 1 2 3 4 5 4 Inventory Payables Production Accounting

1 2

1 2 3

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Analytical Flowcharting Illustration

Symbol selection Drawing the flowchart Use of connector symbol

System analysis Sandwich rule Entity-column relations

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Narrative Techniques
Narrative techniques are useful in the fact-finding stage of system analysis. What are some examples of narrative techniques?

Open-ended and closed-ended questionnaires

Document reviews
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Resource Utilization Analysis

Work measurement involves four basic steps. 1. Identify the tasks. 2. Obtain time estimates for performing the tasks.

3. Adjust these time estimates.

4. Analyze requirements based on these data.
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Resource Utilization Analysis

(Average time/unit + Idle time/unit) Average volume = Total task time

Total time available Total task time = Capacity utilization
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Decision Analysis Techniques

Decision to be made
Conditions that can occur Path to be followed for each condition
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Branching Table Format

Code equal to

Go to

Inconnector Inconnector reference reference

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Decision Table Format

Table Title
1 Condition stub If: Then: Action stub 2

Rules
3

Condition entry Action entry

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Decision Table for Processing Labor Distribution

Line 1 2 3 10 11 12 13 14 Condition action Rule 15 Regular hours 15 Overtime hours 15 Shift bonus hours 1 Y Y Y 2 N 3 N Y 4 N 5 N Y Y 6 N 7 N Y 8

If

Then

Regular dollars Overtime dollars Shift dollars Error no shift or OT Nest record Go to F (Function); R (Rule, same table); T (Table)

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End of Chapter 2

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