1. Structured Analysis & OE/S
Alternatives, specifications
Focusing on the revenue cycle

2. Know goals, plans, tasks, tools, & results of systems analysis
Learning Objectives
Know goals, plans, tasks, tools, & results of systems analysis
Understand/appreciate costs of developing, maintaining, operating information system
Perform some analysis tasks on the Revenue Cycle.
Identify controls.

3. SDLC – Structured System Analysis

4. Systems Analysis Goals
Define problem precisely (make all mistakes early!)
Devise alternative designs (solutions)
Choose & justify one of the alternatives
Develop logical specifications for selected design
Develop physical requirements for selected design
Develop budget for next two SD phases (systems design; systems implementation)

5. Systems Analysis Plans & Documents

6. Accountant’s Involvement in Systems Analysis
Systems specialist or consultant
Staff accountant
User/requester
member of analysis team
interviewee by analysis team
Internal auditor
consultant to analysis team
agent of management/board of directors

7. Systems Analysis Document (1)
Executive summary
Project summary
Summary of proposed system
Summary of impact of new system
Summary of cost/effectiveness & recommendations
Systems analysis summary
facts gathered
analysis performed

8. Systems Analysis Document (2)
User requirements for new system
Operating requirements
Information requirements
Control requirements
Description of future logical system
DFDs, data dictionaries, narrative description
Summary of improvements from new system

9. Systems Analysis Document (3)
Description of future physical system
DFDs, flowcharts, narrative
Summary of cost/benefit improvements - new system
New system constraints
Hardware & software constraints
Interface constraints
Contractual/legal requirements

10. Systems Analysis Document (4)
Design phase budget & schedule
Design phase personnel/computer requirements
Development schedule
Physical requirements
Workload & volume
Response times
Functional layouts of screens & reports
System growth

11. Systems Analysis Document (5)
Recommendations - project leader
Approvals
Attachments
Approved feasibility document
Analysis memos, summaries, tables, graphs, charts
Cost/effectiveness schedules

12. Systems Analysis Tools and Documentation
Memos summarizing interview & observations (walkthroughs)
Narratives describing observations
Charts, tables, graphs
Completed questionnaires (or summaries)
Flowcharts
Physical DFDs
Organization charts

13. Future logical system from current
Add new activities
Remodel existing activities
Add or change control activities
(Compare changes 16.6 vs. 16.7

14. Prioritizing User Requirement Priorities
Critical : if this requirement is not met the entire process or, worse, company is jeopardized.
Important: If this requirement is not meet, the company, department, team or person will be negatively affected, but system is still useful and useable.
Useful: If this requirement is not met, users may be less than satisfied, but impact is minimal.

15. Future Physical from Future Logical
Decide which processes will be manual/automated
Decide which would be immediate processing and which would be batch
Complete specifications for new system
alternative technologies (EDI, mail)
alternative modes (immediate/batch)

16. Select Best Alternative Physical System
Analysis team recommends
IT steering committee ratifies - or sends back
Analysis team conducts cost/effectiveness study
cost/benefit analysis (efficiency criteria)
effectiveness analysis

17. Cost/Benefit Analysis
Estimate costs of new system
direct costs - equipment, personnel, site, materials, supplies
indirect costs - overhead-type costs, utilities
Estimate benefits of new system
direct benefits - reduced personnel/hardware costs
indirect benefits - improved revenue from improved customer support; reduced inventory &/or accounts receivable

18. Cost / Benefit Analysis (2)
Do not apply sunk costs.
Money already spent cannot be recovered.
Make decision looking ahead.
Do include differential cost analysis
Impact of increasing production, revenue.
Requires accurate estimating.

19. Effectiveness Analysis
Analysts & user list all relevant criteria, including costs & benefits and intangibles
Users & analysts jointly assign subjective rankings for each criterion for each alternative
Team ranks alternatives by summarizing ratings
Team recommends best alternative to steering committee

20. Logical Specifications
Will be used in systems selection or design
Executive summary - DFD & narrative for major features, objectives, benefits & constraints
Application description - DFD & narrative for each system function
Information requirements - each input, output, & file: purpose, description, origin, major elements, frequency, volume, distribution
Miscellaneous functions

21. Physical Requirements
Used in systems selection to acquire equipment
Items to be specified
Data storage File size, growth, activity, access requirements Transaction volume/expected growth Peripherals - printers, PCs, plotters Communications Backup & security Processing approaches Reliability Output distribution Response time requirements

22. Schedule - update of preliminary schedules made during systems survey
Budget & Schedule
Budget - from cost/benefit analysis - update of projections made during systems survey
Schedule - update of preliminary schedules made during systems survey
Finally, the document should have the proper approvals

23. The Order Entry/Sales
(OE/S)
Process

24. Understand OE/S process and its environment.
Learning Objectives
Understand OE/S process and its environment.
Appreciate potential of OE/S process to assist management decision making.
Examine how systems integration can improve effectiveness and efficiency of OE/S process.

25. Learning Objectives (2)
Understand logical and physical characteristics of OE/S.
Establish familiarity of CRM and ERP.
Know operations & information process control goals and control plans for OE/S.

26. Revenue Cycle (merchandising)

28. OE/S Horizontal Information Flows
Customer places order
S.O. dept. requires CR approval from CR dept.
CR dept. informs S.O. dept. of decision
S.O. dept. acknowledges customer order
S.O. dept. notifies shipping dept. of S.O.
S.O. dept. notifies warehouse, B/AR/CR process, payroll process, & General ledger
Cont…..

29. OE/S Horizontal Information Flows (2)
Warehouse sends completed picking ticket to shipping department
Shipping dept. informs S.O. dept of shipment
Shipping dept. informs carrier & B/AR/CR process of shipment

30. Vertical perspective of the OE/S system

31. OE/S Context Diagram

32. OE/S Level 0 DFD

33. OE/S Level 1 DFD

34. Level 1 DFD narrative
1.1 - Verify inventory available
inquiry of inventory master file to check
reject or make “backorder” if not available; send to next process if available
record demographic and other info in marketing file
1.2 - Check credit
check to see if valid customer
check A/R master file to see if credit limit is ok
if invalid or over limit, reject; if not, send to next process

35. Level 1 DFD narrative (2)
1.3 Complete sales order
add pricing info from inventory file
update inventory file - reduce quantity on hand
notify GL inventory has been reduced and cost of goods sold increased
update Sales Order master file to show completed order
Notify P/AP/CD that commissions are due
disseminate sales order

36. Dissemination documents
Picking ticket - authorizes warehouse to “pick” goods, send to shipping. Has warehouse location.
Packing slip - attached to outside of carton; identifies customer and goods.
Customer acknowledgement - notifies customer of acceptance of order; shipping date.
Sales order notification - internal form sent to billing department re pending shipment
Bill of lading - contract between shipper & carrier; carrier gets copy, shipper keeps copy.

37. OE/S Files
Marketing file - sales-oriented data, some from OE/S, other from Marketing information system
Customer master file - data about customer characteristics: name, address, credit limit, etc.
Sales order master file - file of “open” sales orders; can be checked periodically/follow up.
Completed picking ticket file - used for follow up and audit purposes.
Shipping notice file - used for follow up and audit purposes

38. OE/S ERD p.331

39. Prepare complete invoice from data available on 10.11
In Class Assignment
Prepare complete invoice from data available on 10.11

40. OE/S Data Entry

41. System Flowchart 1

42. System Flowchart 2

43. System Flowchart 3

44. Six Process Controls
Transaction authorization – valid and in accordance with management objectives.
Segregation of duties – authorization separate from processing; asset custody separate from record-keeping; structure for two party approval.
Supervision – compensate for segregation limits.
Accounting records – audit trail obligation.
Access – prevent unauthorized or unintended destruction, alteration, misuse.
Independent verification – after the fact check on correctness, integrity, and performance.
Note: applicable to all cycles

45. Authorization Controls
Proper authorization of transactions (documentation) should occur so that only valid transactions get processed.
Within the revenue cycle, authorization should take place when:
a sale is made on credit (authorization)
a cash refund is requested (authorization)
posting a cash payment received to a customer’s account (cash pre-list) 13

46. Segregation of Functions Three Rules
Transaction authorization should be separate from transaction processing.
Asset custody should be separate from asset recordkeeping.
The organization should be so structured that the perpetration of a fraud requires collusion between two or more individuals. 14

47. Segregation of Functions
Sales Order Processing
credit authorization separate from SO processing
inventory control separate from warehouse
accounts receivable sub-ledger separate from general ledger control account
Cash Receipts Processing
cash receipts separate from accounting records
accounts receivable sub-ledger separate from general ledger 15

48. Supervision
Supervision of employees serves as a deterrent to dishonest acts and is particularly important in the mailroom(!?!). 16

49. Accounting Records
With a properly maintained audit trail, it is possible to track transactions through the systems and to find where and when errors were made:
pre-numbered source documents
special journals
subsidiary ledgers
general ledger
files 17

50. Access Controls
Access to assets and information (accounting records) should be limited.
Within the revenue cycle, the assets to protect are cash and inventories and access to records such as the accounts receivable subsidiary ledger and cash journal should be restricted. 20

51. Independent Verification
Physical procedures as well as recordkeeping should be independently reviewed at various points in the system to check for accuracy and completeness:
shipping verifies the goods sent from the warehouse are correct in type and quantity
warehouse reconciles the stock release document (picking slip) and packing slip
billing reconciles the shipping notice with the sales invoice
general ledger reconciles journal vouchers from billing, inventory control, cash receipts, and accounts receivable 19

52. Control Considerations for Computer-Based Systems
Authorization - in real-time systems, authorizations are automated: programmed decision rules must be closely monitored.
Segregation of Functions - some consolidation of tasks by the computer; protect the computer programs--coding, processing and maintenance should be separated. 37

53. RFID – Radio Frequency ID tags
Unique identifier with read/transmission capabilities for any item (living or manufactured).
Unit cost to drop to pennies.
Improving read and transmission capabilities.
Wal-mart requiring major supplier use by 2005.

54. Control Considerations for Computer-Based Systems
Supervision - in POS systems, the cash register’s internal tape or database is an added form of supervision.
Access Control - magnetic records are vulnerable to both authorized and unauthorized exposure and should be protected.
Must have limited file accessibility
Computer programs must be safeguarded and monitored 38

55. Control Considerations for Computer-Based Systems
Accounting Records - rest on reliability and security of magnetically stored data. The accountant should be skeptical about accepting the accuracy of hard-copy printouts of journals and ledgers.
Backup is a concern for direct access files, and the system needs to ensure that backup of all files is continuously kept. 39

56. Microcomputer-Based Accounting Systems
Used by small firms and some large decentralized firms
Allow one or few individuals to perform entire accounting function
Most systems are divided into modules
general ledger
inventory control
payroll
cash disbursements
purchases and accounts payable
cash receipts
sales order 40

57. Microcomputer Control Issues
Segregation of Duties - tend to be inadequate and should be compensated for with increased supervision, detailed management reports, and frequent independent verification
Access Control - access controls to the data stored on the computer tends to be weak; methods such as encryption and disk locking devices should be used
Accounting Records - computer disk failures cause data losses; external backup methods need to be implemented to allow data recovery 41

58. P-2: Enter data close to location where customer order is prepared
Control Goals of the Business Process
Control Matrix (1)
Control Goal of the
Operations Process
Control Goals of the Information Process
Ensure effectiveness of operations by
achieving the following
process goals
Ensure
efficient
employ-
ment of
resources
Ensure
security of
resources
For sales
order inputs,
ensure:
For sales order
and inventory
master data,
ensure:
For shipping
notice inputs,
ensure:
For sales
order master
data, ensure:
Recommended
Control Plans A B C D IV IC IA UC UA IV IC IA UC UA
P-1: Independent customer master file maintenance
P-1
P-1
P-1
P-2: Enter data close to location where customer order is prepared
P-2
P-2
P-2
P-2
P-2
P-2
P-3: Customer credit check
P-3
P-3
P-3
P-4: Independent pricing daa
P-4
P-5: Independent shipping authorization
P-5
P-5
P-6: Packing slip tickler file
P-6
P-6
P-7: Completed picking ticket file
P-7
Key: possible system goals: A - Provide timely responses to customer inquiries
B - Provide timely acknowledgement of customer orders
C - Provide assurance of customers’ creditworthiness
D - Provide timely shipment of goods to customers
IV = input validity
IC = input completeness
IA = input accuracy
UC = update completeness
UA = update accuracy

59. P-8: 1 for 1 checking of goods, picking
Control Goals of the Business Process
Control Matrix (2)
Control Goal of the
Operations Process
Control Goals of the Information Process
Ensure effectiveness of operations by
achieving the following
process goals
Ensure
efficient
employ-
ment of
resources
Ensure
security of
resources
For sales
order inputs,
ensure:
For sales order
and inventory
master data,
ensure:
For shipping
notice inputs,
ensure:
For sales
order master
data, ensure:
Recommended
Control Plans A B C D IV IC IA UC UA IV IC IA UC UA
P-8: 1 for 1 checking of goods, picking
ticket and packing slip
P-8
P-8
P-8
P-9: Populate inputs with master data
P-9
P-9
P-9
P-9
P-9
P-9
P-9
P-9
P-9
P-9
P-10: Online prompting
P-10
P-10
P-10
P-10
P-10
P-10
P-11: Preformatted screens
P-11
P-11
P-11
P-11
P-11
P-11
P-12: Interactive feedback checks
P-12
P-12
P-13: Programmed edit checks
P-13
P-13
P-13
P-13
P-14: Compare input data with
master data
P-14
P-14
P-14
P-14
P-14
P-14
Key: possible system goals: A - Provide timely responses to customer inquiries
B - Provide timely acknowledgement of customer orders
C - Provide assurance of customers’ creditworthiness
D - Provide timely shipment of goods to customers
IV = input validity
IC = input completeness
IA = input accuracy
UC = update completeness
UA = update accuracy

60. Key Terms Structured systems analysis
Approved systems analysis document
Alternative future physical systems
Cost/benefit analysis
Cost/effectiveness study
Order/entry sales (OE/S) process
Picking ticket
Packing slip
Data mining
Data warehousing
Data marts
Customer acknowledgement
Bill of lading
Customer relationship management (CRM) systems
Sales order

61. Solution P10 - 8 Process Subsidiary Functions Inputs Outputs
1.0 Respond to
customer requests
1.1 Edit and route
Customer inquiry
Customer order
Edited inquiry
Edited order
Marketing data
1.2 Respond to inquiry
Customer master data
Inventory master data
Sales order master data
Customer reply
2.0 Validate sales order
2.1 Check credit
Accounts receivable master data
Credit-approved order
2.2 Verify inventory availability
Accepted order

62. Solution P10-8 cont. 3.0 Complete picking ticket
3.1 Match goods with picking ticket
Picking ticket
Matched picking ticket
3.2 Enter quantities picked
Completed picking ticket
4.0 Execute shipping notice
4.1 Match orders
Packing slip
Matched sales order
Completed picking ticket data
4.2 Produce shipping notice
Sales order master data
Shipping's inventory notification
Shipping's billing notification
Bill of lading
Completed packing slip
Shipping notice data

63. Using Access to generate queries
Recommendations
Ch. 5: RQ 1,2,3,6,7d,9; DQ 1,3
Using Access to generate queries
Exporting Access data to XL for reporting.