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CHAPTER 3Systems Development and Documentation TechniquesINTRODUCTION•Questions to be addressed in this chapter include:–What is the purpose of documentation?–Why do accountants need to understand documentation?–What documentation techniques are used in accounting systems?–What are data flow diagrams and flowcharts? How are they alike and different, and how are they prepared?•Documentationincludes narratives (written descriptions), flowcharts, diagrams, and other writtenmaterial. 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.•In this chapter, we discuss two of the most common documentation tools:–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.–FlowchartsInclude three types:•Document flowchartsdescribe the flow of documents and information between departments or units.•System flowchartsdescribe the relationship between inputs, processing, and outputs for a system.•Program flowchartsdescribe the sequence of logical operations performed in a computer program.•Documentation techniques are necessarytools 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.