2Characterize the use of systems techniques by auditors and Learning Objective 1Characterize the use of systemstechniques by auditors andsystems development personnel.
3Users of Systems Techniques Systems techniques are tools.AnalysisDesignDocumentationThey are largely graphical (pictorial) in nature.
4Use of Systems Techniques in Auditing What are the two basic componentsof an auditing engagement?1. The interim audit2. The financialstatement auditCompliance testingSubstantive testing
5Internal Control Evaluation Auditors are typically concerned with theflow of processing and distribution ofdocuments within an application system.Auditors use charts to analyze thedistribution of documents in a system.
6Compliance Testing Compliance testing requires an understanding of the controls that are to be tested.Auditors must have a basic understandingof systems techniques.– input-process-output (IPO)– hierarchy plus input-process-output (HIPO)– logical data flow diagrams (DFD)
7Working Papers These are the records kept by an auditor of the procedures and tests applied, theinformation obtained, and conclusionsdrawn during an audit engagement.Required by professional standards
8Working Papers What are some of the systems techniques used by auditors to document and analyzethe content of working papers?– internal control questionnaires– analytic flowcharts– system flowcharts– branching and decision tables
9Use of Systems Techniques in Systems Development What are the three phases of asystems development project?1. Systems analysis2. Systems design3. Systems implementation
10Systems Analysis Much of a systems analyst’s job involves collecting and organizing facts.Systems techniques examples:InterviewingObservationsDocument reviewsMatrix
11Systems Design A blueprint must be formulated for the complete system. Input/output (matrix) analysisSystems flowchartingData flow diagrams
12Systems Implementation Systems implementation involves theactual carrying out of the design plan.What systems techniques serveas a documentation tool?Program flowchartsDecision tables
13Describe the use of flowcharting techniques in the analysis of Learning Objective 2Describe the use of flowchartingtechniques in the analysis ofinformation processing systems.
14Systems Techniques What is a flowchart? A flowchart is a symbolic diagramthat shows the data flow andsequence of operations in a system.
20Symbol Use in Flowcharting Symbols are used in a flowchart torepresent the functions of aninformation or other type of system.Normal direction of flow is fromleft to right and top to bottom.Open arrowheads should be usedon reverse-direction flowlines.
21Symbol Usage Illustration Normal Direction of FlowInvoiceReviewandapproveApprovedinvoice
22Symbol Usage Illustration Reverse Flow Shown with ArrowheadsApprovedinvoiceReviewandapproveInvoice
23Symbol Usage Illustration Use of Connector SymbolApprovedinvoiceAStoresInvoiceAPurchasing
25Define common systems techniques, such as HIPO charts, systems Learning Objective 3Define common systems techniques,such as HIPO charts, systemsflowcharts, and logicaldata flow diagrams.
26IPO and HIPO Charts These charts are used primarily by systems development personnel.At the most general level of analysis,only the basic input-process-outputrelations in a system are of concern.Additional processing detail is providedby hierarchy plus input-process-output.
28HIPO Illustration Payroll system Data preparation Processing Review 1.0Data preparation2.0Processing3.0Review4.0
29Each numbered module would be detailed in an IPO chart. HIPO Illustration3.13.2Calculategross payCalculatenet payAccumulatehours worked3.11Find correctpay rate3.12Computegross pay3.13Each numbered module would be detailed in an IPO chart.
30Systems and Program Flowcharts A systems flowchart identifies the overallor broad flow of operations in a system.A program flowchart (block flowchart)is more detailed concerningindividual processing functions.
31Logical Data Flow Diagram Symbols NameSymbolMeaningTerminatorRepresents sources anddestinations of dataProcessTask or functionbeing doneData storeA repository of dataData flowCommunicationchannel
32Data Flow Diagram Timekeeping Process payroll data Employees PaychecksPayroll DataPayrolldataPayrolldetails
34Data Flow Diagram Expanded EmployeedataNet pay anddeductionsCalculatepayP2Data toprocessEmployeesPaychecksValidpayroll data
35Data Flow Diagram Expanded Further UpdateemployeefilesNet pay anddeductionsProcesspayrolljournalCurrentamountsJournaldataDetailsEmployeesPaychecksComputenet pay
36Analytic, Document, and Forms Distribution Flowcharts An analytic flowchart is similarto a systems flowchart in levelof detail and technique.A document flowchart is similar to ananalytic flowchart but contains lessdetail about the processing functionsof each entity shown on the chart.
37Analytic, Document, and Forms Distribution Flowcharts The forms distribution chart illustratesthe distribution of multiple copyforms with an organization.PurchaseReceive
38Analytic Flowchart Purchasing Suppliers Approve vendor list Select vendorsPreparequotationrequestsRequestsforquotationRequestsforquotationQuotations
40Vice President Manufacturing Document FlowchartAccountsPayablePurchasing AgentReceivingStoresControllerVice President Manufacturing2Purchaserequisition1order345To Vendor
41Forms Distribution Chart PurchasingInventoryPayablesProductionAccountingPurchaseorder copy23451
42Analytical Flowcharting Illustration Planning the Flowchart:Symbol selectionSystem analysisDrawing the flowchartSandwich ruleUse of connector symbolEntity-column relations
43Narrative 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 questionnairesDocument reviews
44Resource 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.
45Resource Utilization Analysis Work Measurement:(Average time/unit + Idle time/unit)× Average volume = Total task timeTotal time available ÷ Total task time= Capacity utilization
46Decision Analysis Techniques Branching Table:Decision to be madeConditions that can occurPath to be followed for each condition
47Branching Table Format Codeequal toGo toInconnectorreference1234
48Decision Table Format N If: Then: Table Title Rules Condition stub Action stub123…NIf:Then:Table TitleRulesCondition entryAction entry
49Decision Table for Processing Labor Distribution Line1231011121314Condition action Rule 15 Regular hours15 Overtime hours15 Shift bonus hoursRegular dollarsOvertime dollarsShift dollarsError no shift or OTNest recordY×–N45678IfThenGo to – F (Function); R (Rule, same table); T (Table)