CHAPTER 3
Systems Development and Documentation Techniques
INTRODUCTION
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Questions to be addressed in this chapter include:
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What is the purpose of documentation?
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Why do accountants need to understand documentation?
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What documentation techniques are used in accounting systems?
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What are data flow diagrams and flowcharts?
How are they alike and different, and how
are they prepared?
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Documentation
includes narratives (written descriptions), flowcharts, diagrams, and other written
material.
Documentation covers the who, what, when, where, why, and how of data entry,
processing, storage, information output, and system controls.
–
Accountants use documentation to understand how a system works; to evaluate the
strengths and weaknesses of an entity’s internal controls; and to determine if a proposed
system meets the needs of its users.
They prepare documentation to demonstrate how a
proposed system would work or demonstrate their understanding of a system of internal
controls.
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In this chapter, we discuss two of the most common documentation tools:
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Data flow diagrams
--Graphical descriptions of the sources and destinations of data.
DFDs show where data comes from, how it flows, the processes performed on it, and
where it goes.
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Flowcharts
Include three types:
•
Document flowcharts
describe the flow of documents and information between
departments or units.
•
System flowcharts
describe the relationship between inputs, processing, and
outputs for a system.
•
Program flowcharts
describe the sequence of logical operations performed in a
computer program.
•
Documentation techniques are
necessary
tools for accountants:
–
SAS-94 requires that auditors understand the automated and manual procedures an entity
uses.
–
This understanding can be gleaned through documenting the internal control system—a
process that effectively exposes strengths and weaknesses of the system.
–
Sarbanes-Oxley (2002) effectively requires that publicly-traded corporations and their
auditors document and test the company’s internal controls.
–
Auditing Standard No. 2 promulgated by the PCAOB requires that the external auditor
express an opinion on the client’s system of internal controls.
•
Documentation tools help accountants by organizing very complicated systems into a form that
can be more readily understood and helping new team members understand a pre-existing system.
•
Both DFDs and flowcharts are used frequently by IS professionals, can be prepared with
available software, and are tested on professional exams.
DATA FLOW DIAGRAMS
•
A data flow diagram (DFD) graphically describes the flow of data within an organization.
It is
used to document existing systems and to plan and design new systems.
There is no black-and-
white approach to developing a DFD.
