SYSTEMS TECHNIQUES AND DOCUMENTATION

Characterize the use of systems techniques by auditors and Learning Objective 1 Characterize the use of systems techniques by auditors and systems development personnel.

Users of Systems Techniques Systems techniques are tools. Analysis Design Documentation They are largely graphical (pictorial) in nature.

Use of Systems Techniques in Auditing What are the two basic components of an auditing engagement? 1. The interim audit 2. The financial statement audit Compliance testing Substantive testing

Internal Control Evaluation Auditors are typically concerned with the flow of processing and distribution of documents within an application system. Auditors use charts to analyze the distribution of documents in a system.

Compliance Testing Compliance testing requires an understanding of the controls that are to be tested. Auditors must have a basic understanding of systems techniques. – input-process-output (IPO) – hierarchy plus input-process-output (HIPO) – logical data flow diagrams (DFD)

Working Papers These are the records kept by an auditor of the procedures and tests applied, the information obtained, and conclusions drawn during an audit engagement. Required by professional standards

Working Papers What are some of the systems techniques used by auditors to document and analyze the content of working papers? – internal control questionnaires – analytic flowcharts – system flowcharts – branching and decision tables

Use of Systems Techniques in Systems Development What are the three phases of a systems development project? 1. Systems analysis 2. Systems design 3. Systems implementation

Systems Analysis Much of a systems analyst’s job involves collecting and organizing facts. Systems techniques examples: Interviewing Observations Document reviews Matrix

Systems Design A blueprint must be formulated for the complete system. Input/output (matrix) analysis Systems flowcharting Data flow diagrams

Systems Implementation Systems implementation involves the actual carrying out of the design plan. What systems techniques serve as a documentation tool? Program flowcharts Decision tables

Describe the use of flowcharting techniques in the analysis of Learning Objective 2 Describe the use of flowcharting techniques in the analysis of information processing systems.

Systems Techniques What is a flowchart? A flowchart is a symbolic diagram that shows the data flow and sequence of operations in a system.

Basic Symbols Input/output Process Flowline Annotation

Specialized Input/Output Symbols Punched card Punched tape Online storage Magnetic disk Magnetic tape

Specialized Input/Output Symbols Document Communication link Manual input Offline storage Display

Specialized Process Symbols Decision Auxiliary operation Predefined process Merge Preparation Extract Collate Manual operation Sort

Additional Symbols Connector Transmittal tape Off-page connector Parallel mode Terminal

Symbol Use in Flowcharting Symbols are used in a flowchart to represent the functions of an information or other type of system. Normal direction of flow is from left to right and top to bottom. Open arrowheads should be used on reverse-direction flowlines.

Symbol Usage Illustration Normal Direction of Flow Invoice Review and approve Approved invoice

Symbol Usage Illustration Reverse Flow Shown with Arrowheads Approved invoice Review and approve Invoice

Symbol Usage Illustration Use of Connector Symbol Approved invoice A Stores Invoice A Purchasing

Symbol Usage Illustration Bidirectional Flow Shown with Arrowheads Requisition Prepare purchase order and update vendor files Vendor files Purchase order

Define common systems techniques, such as HIPO charts, systems Learning Objective 3 Define common systems techniques, such as HIPO charts, systems flowcharts, and logical data flow diagrams.

IPO and HIPO Charts These charts are used primarily by systems development personnel. At the most general level of analysis, only the basic input-process-output relations in a system are of concern. Additional processing detail is provided by hierarchy plus input-process-output.

Description: Calculate IPO Chart Payroll job record Payroll master file Accumulate hours worked Find correct pay rate Compute gross pay Gross pay records Error messages Author: Mr. Foxx Chart Number: 3.1 System: Payroll Description: Calculate Gross Pay Date: 6/9/0X Input Process Output

HIPO Illustration Payroll system Data preparation Processing Review 1.0 Data preparation 2.0 Processing 3.0 Review 4.0

Each numbered module would be detailed in an IPO chart. HIPO Illustration 3.1 3.2 Calculate gross pay Calculate net pay Accumulate hours worked 3.11 Find correct pay rate 3.12 Compute gross pay 3.13 Each numbered module would be detailed in an IPO chart.

Systems and Program Flowcharts A systems flowchart identifies the overall or broad flow of operations in a system. A program flowchart (block flowchart) is more detailed concerning individual processing functions.

Logical Data Flow Diagram Symbols Name Symbol Meaning Terminator Represents sources and destinations of data Process Task or function being done Data store A repository of data Data flow Communication channel

Data Flow Diagram Timekeeping Process payroll data Employees Paychecks Payroll Data Payroll data Payroll details

Data Flow Diagram Expanded Employee data Current status Timekeeping Payroll data Verify payroll P1 Valid payroll data Data valid

Data Flow Diagram Expanded Employee data Net pay and deductions Calculate pay P2 Data to process Employees Paychecks Valid payroll data

Data Flow Diagram Expanded Further Update employee files Net pay and deductions Process payroll journal Current amounts Journal data Details Employees Paychecks Compute net pay

Analytic, Document, and Forms Distribution Flowcharts An analytic flowchart is similar to a systems flowchart in level of detail and technique. A document flowchart is similar to an analytic flowchart but contains less detail about the processing functions of each entity shown on the chart.

Analytic, Document, and Forms Distribution Flowcharts The forms distribution chart illustrates the distribution of multiple copy forms with an organization. Purchase Receive

Analytic Flowchart Purchasing Suppliers Approve vendor list Select vendors Prepare quotation requests Requests for quotation Requests for quotation Quotations

Analytic Flowchart Purchasing Suppliers Quotations Select bid Prepare purchase order Purchase order Purchase order

Vice President Manufacturing Document Flowchart Accounts Payable Purchasing Agent Receiving Stores Controller Vice President Manufacturing 2 Purchase requisition 1 order 3 4 5 To Vendor

Forms Distribution Chart Purchasing Inventory Payables Production Accounting Purchase order copy 2 3 4 5 1

Analytical Flowcharting Illustration Planning the Flowchart: Symbol selection System analysis Drawing the flowchart Sandwich rule Use of connector symbol Entity-column relations

Narrative 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 questionnaires Document reviews

Resource 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.

Resource Utilization Analysis Work Measurement: (Average time/unit + Idle time/unit) × Average volume = Total task time Total time available ÷ Total task time = Capacity utilization

Decision Analysis Techniques Branching Table: Decision to be made Conditions that can occur Path to be followed for each condition

Branching Table Format Code equal to Go to Inconnector reference 1 2 3 4

Decision Table Format N If: Then: Table Title Rules Condition stub Action stub 1 2 3 … N If: Then: Table Title Rules Condition entry Action entry

Decision Table for Processing Labor Distribution Line 1 2 3 10 11 12 13 14 Condition action Rule  15 Regular hours 15 Overtime hours 15 Shift bonus hours Regular dollars Overtime dollars Shift dollars Error no shift or OT Nest record Y × – N 4 5 6 7 8 If Then Go to – F (Function); R (Rule, same table); T (Table)

QUESTIONS ???