Presentation on theme: "Structured Analysis & OE/S"— Presentation transcript:
1 Structured Analysis & OE/S Alternatives, specificationsFocusing on the revenue cycle
2 Know goals, plans, tasks, tools, & results of systems analysis Learning ObjectivesKnow goals, plans, tasks, tools, & results of systems analysisUnderstand/appreciate costs of developing, maintaining, operating information systemPerform some analysis tasks on the Revenue Cycle.Identify controls.
4 Systems Analysis Goals Define problem precisely (make all mistakes early!)Devise alternative designs (solutions)Choose & justify one of the alternativesDevelop logical specifications for selected designDevelop physical requirements for selected designDevelop budget for next two SD phases (systems design; systems implementation)
6 Accountant’s Involvement in Systems Analysis Systems specialist or consultantStaff accountantUser/requestermember of analysis teaminterviewee by analysis teamInternal auditorconsultant to analysis teamagent of management/board of directors
7 Systems Analysis Document (1) Executive summaryProject summarySummary of proposed systemSummary of impact of new systemSummary of cost/effectiveness & recommendationsSystems analysis summaryfacts gatheredanalysis performed
8 Systems Analysis Document (2) User requirements for new systemOperating requirementsInformation requirementsControl requirementsDescription of future logical systemDFDs, data dictionaries, narrative descriptionSummary of improvements from new system
9 Systems Analysis Document (3) Description of future physical systemDFDs, flowcharts, narrativeSummary of cost/benefit improvements - new systemNew system constraintsHardware & software constraintsInterface constraintsContractual/legal requirements
13 Future logical system from current Add new activitiesRemodel existing activitiesAdd 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/automatedDecide which would be immediate processing and which would be batchComplete specifications for new systemalternative technologies (EDI, mail)alternative modes (immediate/batch)
16 Select Best Alternative Physical System Analysis team recommendsIT steering committee ratifies - or sends backAnalysis team conducts cost/effectiveness studycost/benefit analysis (efficiency criteria)effectiveness analysis
17 Cost/Benefit Analysis Estimate costs of new systemdirect costs - equipment, personnel, site, materials, suppliesindirect costs - overhead-type costs, utilitiesEstimate benefits of new systemdirect benefits - reduced personnel/hardware costsindirect 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 analysisImpact of increasing production, revenue.Requires accurate estimating.
19 Effectiveness Analysis Analysts & user list all relevant criteria, including costs & benefits and intangiblesUsers & analysts jointly assign subjective rankings for each criterion for each alternativeTeam ranks alternatives by summarizing ratingsTeam recommends best alternative to steering committee
20 Logical Specifications Will be used in systems selection or designExecutive summary - DFD & narrative for major features, objectives, benefits & constraintsApplication description - DFD & narrative for each system functionInformation requirements - each input, output, & file: purpose, description, origin, major elements, frequency, volume, distributionMiscellaneous functions
21 Physical Requirements Used in systems selection to acquire equipmentItems to be specifiedData 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 & ScheduleBudget - from cost/benefit analysis - update of projections made during systems surveySchedule - update of preliminary schedules made during systems surveyFinally, the document should have the proper approvals
24 Understand OE/S process and its environment. Learning ObjectivesUnderstand 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.
34 Level 1 DFD narrative1.1 - Verify inventory availableinquiry of inventory master file to checkreject or make “backorder” if not available; send to next process if availablerecord demographic and other info in marketing file1.2 - Check creditcheck to see if valid customercheck A/R master file to see if credit limit is okif invalid or over limit, reject; if not, send to next process
35 Level 1 DFD narrative (2)1.3 Complete sales orderadd pricing info from inventory fileupdate inventory file - reduce quantity on handnotify GL inventory has been reduced and cost of goods sold increasedupdate Sales Order master file to show completed orderNotify P/AP/CD that commissions are duedisseminate 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 shipmentBill of lading - contract between shipper & carrier; carrier gets copy, shipper keeps copy.
37 OE/S FilesMarketing file - sales-oriented data, some from OE/S, other from Marketing information systemCustomer 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
44 Six Process ControlsTransaction 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 Processingcredit authorization separate from SO processinginventory control separate from warehouseaccounts receivable sub-ledger separate from general ledger control accountCash Receipts Processingcash receipts separate from accounting recordsaccounts receivable sub-ledger separate from general ledger15
48 SupervisionSupervision of employees serves as a deterrent to dishonest acts and is particularly important in the mailroom(!?!).16
49 Accounting RecordsWith 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 documentsspecial journalssubsidiary ledgersgeneral ledgerfiles17
50 Access ControlsAccess 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 quantitywarehouse reconciles the stock release document (picking slip) and packing slipbilling reconciles the shipping notice with the sales invoicegeneral ledger reconciles journal vouchers from billing, inventory control, cash receipts, and accounts receivable19
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 accessibilityComputer programs must be safeguarded and monitored38
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 firmsAllow one or few individuals to perform entire accounting functionMost systems are divided into modulesgeneral ledgerinventory controlpayrollcash disbursementspurchases and accounts payablecash receiptssales order40
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 verificationAccess Control - access controls to the data stored on the computer tends to be weak; methods such as encryption and disk locking devices should be usedAccounting Records - computer disk failures cause data losses; external backup methods need to be implemented to allow data recovery41
58 P-2: Enter data close to location where customer order is prepared Control Goals of the Business ProcessControl Matrix (1)Control Goal of theOperations ProcessControl Goals of the Information ProcessEnsure effectiveness of operations byachieving the followingprocess goalsEnsureefficientemploy-ment ofresourcesEnsuresecurityofresourcesFor salesorder inputs,ensure:For sales orderand inventorymaster data,ensure:For shippingnotice inputs,ensure:For salesorder masterdata, ensure:RecommendedControl PlansABCDIVICIAUCUAIVICIAUCUAP-1: Independent customer master file maintenanceP-1P-1P-1P-2: Enter data close to location where customer order is preparedP-2P-2P-2P-2P-2P-2P-3: Customer credit checkP-3P-3P-3P-4: Independent pricing daaP-4P-5: Independent shipping authorizationP-5P-5P-6: Packing slip tickler fileP-6P-6P-7: Completed picking ticket fileP-7Key: possible system goals: A - Provide timely responses to customer inquiriesB - Provide timely acknowledgement of customer ordersC - Provide assurance of customers’ creditworthinessD - Provide timely shipment of goods to customersIV = input validityIC = input completenessIA = input accuracyUC = update completenessUA = update accuracy
59 P-8: 1 for 1 checking of goods, picking Control Goals of the Business ProcessControl Matrix (2)Control Goal of theOperations ProcessControl Goals of the Information ProcessEnsure effectiveness of operations byachieving the followingprocess goalsEnsureefficientemploy-ment ofresourcesEnsuresecurityofresourcesFor salesorder inputs,ensure:For sales orderand inventorymaster data,ensure:For shippingnotice inputs,ensure:For salesorder masterdata, ensure:RecommendedControl PlansABCDIVICIAUCUAIVICIAUCUAP-8: 1 for 1 checking of goods, pickingticket and packing slipP-8P-8P-8P-9: Populate inputs with master dataP-9P-9P-9P-9P-9P-9P-9P-9P-9P-9P-10: Online promptingP-10P-10P-10P-10P-10P-10P-11: Preformatted screensP-11P-11P-11P-11P-11P-11P-12: Interactive feedback checksP-12P-12P-13: Programmed edit checksP-13P-13P-13P-13P-14: Compare input data withmaster dataP-14P-14P-14P-14P-14P-14Key: possible system goals: A - Provide timely responses to customer inquiriesB - Provide timely acknowledgement of customer ordersC - Provide assurance of customers’ creditworthinessD - Provide timely shipment of goods to customersIV = input validityIC = input completenessIA = input accuracyUC = update completenessUA = update accuracy
60 Key Terms Structured systems analysis Approved systems analysis documentAlternative future physical systemsCost/benefit analysisCost/effectiveness studyOrder/entry sales (OE/S) processPicking ticketPacking slipData miningData warehousingData martsCustomer acknowledgementBill of ladingCustomer relationship management (CRM) systemsSales order
61 Solution P10 - 8 Process Subsidiary Functions Inputs Outputs 1.0 Respond tocustomer requests1.1 Edit and routeCustomer inquiryCustomer orderEdited inquiryEdited orderMarketing data1.2 Respond to inquiryCustomer master dataInventory master dataSales order master dataCustomer reply2.0 Validate sales order2.1 Check creditAccounts receivable master dataCredit-approved order2.2 Verify inventory availabilityAccepted order
62 Solution P10-8 cont. 3.0 Complete picking ticket 3.1 Match goods with picking ticketPicking ticketMatched picking ticket3.2 Enter quantities pickedCompleted picking ticket4.0 Execute shipping notice4.1 Match ordersPacking slipMatched sales orderCompleted picking ticket data4.2 Produce shipping noticeSales order master dataShipping's inventory notificationShipping's billing notificationBill of ladingCompleted packing slipShipping notice data
63 Using Access to generate queries RecommendationsCh. 5: RQ 1,2,3,6,7d,9; DQ 1,3Using Access to generate queriesExporting Access data to XL for reporting.