DEVELOPMENT SYSTEMS AND DOCUMENTATION TECHNIQUES
Chapter 3
What is documentation?
Narratives Flowcharts Diagrams Other written material
Importance of Documentation
SAS-94 requires that auditors understand the automated and manual procedures an entity uses. SOX requires that publicly-traded corporations and their auditors document and test the company's internal controls. Auditing Standard No. 2 requires that the external auditor express an opinion on the client's system of internal controls.
Data Flow Diagrams (DFDs)
Definition graphically depicts the logical flow of data Elements:
Data sources/destinations Data flow lines Processes Data stores
Data Flow Diagrams
Accounts Receivable
Customer
Customer payment
1.0 Process Payment
Remittance data
2.0 Update A/R
Receivables Information
Credit Manager
Deposit
Bank
Context Diagram -- Payroll
ts or p re an d pa s nt e m y
Time cards Departments
x Ta
Government agencies
Employee paychecks Employees
Payroll Processing System Payroll check Human resources
Bank New employee form Payroll report Employee change form Management
Level 0 DFD
Employee change form New employee form Human resources 1.0 Update employee/ payroll file Employee/ payroll file 3.0 Prepare reports Departments Time cards
Em plo e ye c
k ec h
s
Employees
2.0 Pay employees Payroll tax disbursement voucher 4.0 Pay taxes
Payroll checks
Bank
Payroll disbursement data 5.0 Update general ledger General ledger
Payroll report
Management
Tax reports and check
Government agencies
Level 1 DFD for Process 2.0
cks
Departments Time cards
he yee c lo Emp
Employees
Payroll register 2.1 Process payroll
2.2 Prepare cash disbursements
Payroll checks
Bank
Tax rates tables
Employee/payroll file
Payroll disbursement voucher
Data Flow Diagram Example
Data Inputs Processes Data Outputs
Data Flow Diagram Example
CAST Manual Module: Purchases
As raw materials are needed for production and bottling, Production sends a purchase requisition to Purchasing where a prenumbered purchase order is completed in quadruplicate. The purchase order must be approved and signed by a purchasing supervisor. Copy 1 of the purchase order is sent to the supplier. Copy 2 of the purchase order is sent to Accounting. Copy 3 of the purchase order is sent to Receiving. Copy 4 of the purchase order and the purchase requisition are held temporarily in Purchasing. As goods are received from suppliers, they are inspected, counted and compared to copy 3 of the purchase order. A prenumbered receiving report is prepared in triplicate. Copy 3 of the receiving report and copy 3 of the purchase order are filed numerically. Copy 2 of the receiving report is sent to Purchasing where it is matched with copy 4 of the purchase order and the purchase requisition and filed numerically.
Flowcharts
Definition a tool used to depict a part of an information system in a clear, concise, and logical manner Types
Document flowchart - depicts flow of documents & information between areas of responsibility within an organization Computer system flowchart depicts how data are captured & input into the system, the processing performed on the data, and the information output by the AIS Program flowchart indicates the sequence of logical operations performed by the computer when executing a program
Flowchart Symbols: Input/Output
Symbol Name Document; multiple copies Manual or online keying Display Journal/ledger Input/output; Transmittal tape; batch total Terminal or personal computer
Flowchart Symbols: Processing
Symbol Name Computer processing Manual operation Auxiliary operation Offline keying operation;
Flowchart Symbols: Storage
Symbol Name Magnetic disk Magnetic tape Diskette Online storage Manual file N numeric A alphabetic D date
Flowchart Symbols: Miscellaneous
Symbol Name Document or processing flow Data or information flow Communication link
A P2/1
On-page connector Off-page connector
Flowchart Symbols: Miscellaneous
Symbol Terminal Decision Annotation Name
P2/2 P2/3
P2/1
Flowchart Example
CAST Manual Module: Purchases
As raw materials are needed for production and bottling, Production sends a purchase requisition to Purchasing where a prenumbered purchase order is completed in quadruplicate. The purchase order must be approved and signed by a purchasing supervisor. Copy 1 of the purchase order is sent to the supplier. Copy 2 of the purchase order is sent to Accounting. Copy 3 of the purchase order is sent to Receiving. Copy 4 of the purchase order and the purchase requisition are held temporarily in Purchasing. As goods are received from suppliers, they are inspected, counted and compared to copy 3 of the purchase order. A prenumbered receiving report is prepared in triplicate. Copy 3 of the receiving report and copy 3 of the purchase order are filed numerically. Copy 2 of the receiving report is sent to Purchasing where it is matched with copy 4 of the purchase order and the purchase requisition and filed numerically.
One Final Note:
Each page of each DFD or Flowchart MUST be numbered and have a proper heading which includes:
the company name title of the diagram date prepared preparer's name
System Flowcharts
A system flowchart depicts the relationship among the inputs, processes, and outputs of an AIS.
The system flowchart begins by identifying the inputs to the system. Each input is followed by a process, i.e., the steps performed on the data. The process is followed by outputs--the resulting new information. In other words, it's the same basic input process output pattern that we saw in the document flowchart.
Program Flowcharts
Program flowcharts illustrate the sequence of logical operations performed by a computer in executing a program. They also follow an input process output pattern.
Differences Between DFDs and Flowcharts
DFDs emphasize the flow of data and what is happening in a system, whereas a flowchart emphasizes the flow of documents or records containing data. A DFD represents the logical flow of data, whereas a flowchart represents the physical flow of data.
Differences Between DFDs and Flowcharts
Flowcharts are used primarily to document existing systems and are concerned with the physical aspects of the input, processing and storage of the data. DFDs, in contrast, are primarily used in the design of new systems and do not concern themselves with the physical devices used to process, store, and transform data.
Differences Between DFDs and Flowcharts
DFDs make use of only four symbols. Flowcharts use many symbols and thus can show more detail.
Summary
We have:
Prepared two types of graphical forms of documentation:
Data flow diagrams Flowcharts
Discussed the importance of these tools to accountants and when they are employed Discussed the basic guidelines for creating data flow diagrams and flowcharts