SYSTEMS TECHNIQUES AND DOCUMENTATION
CAREFUL STUDY OF THIS CHAPTER WILL ENABLE YOU TO:
1. CHARACTERIZE THE USE OF SYSTEMS TECHNIQUES BY AUDITORS AND SYSTEMS DEVELOPMENT PERSONNEL
2. DESCRIBE THE USE OF FLOWCHARTING TECHNIQUES IN THE ANALYSIS OF INFORMATION PROCESSING SYSTEMS
3. DEFINE COMMON SYSTEMS TECHNIQUES, SUCH AS HIPO CHARTS, SYSTEMS FLOWCHARTS, AND LOGICAL DATA FLOW DIAGRAMS
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SYSTEMS TECHNIQUES ARE TOOLS USED IN THE ANALYSIS, DESIGN AND DOCUMENTATION OF SYSTEMS
THEY ARE PICTORIAL = PICTURES
THEY ARE USED BY:
INTERNAL AUDITORS
EXTERNAL AUDITORS
SYSTEMS PERSONNEL WHO DEVELOP NEW SYSTEMS
ACCOUNTANTS WHO DO SYSTEMS WORK AS CONSULTANTS OR INTERNALLY FOR THE COMPANY THEY WORK FOR
USE OF SYSTEM TECHNIQUES IN AUDITING
INTERIM AUDIT=WHERE WE ASCERTAIN THE INTERNAL CONTROL STRUCTURE AND DECIDE THE DEGREE TO WHICH WE INTEND TO RELY ON INTERNAL CONTROLS TO RESTRICT SUBSTANTIVE TESTING--USE COMPLIANCE TESTS
THEN FINANCIAL STATEMENT AUDIT=DIRECT VERIFICATION OF ACCOUNT BALANCES--USE SUBSTANTIVE TESTS
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1. INTERNAL CONTROL EVALUATION
AUDITORS CONCERNED WITH FLOW OF PROCESSING AND DISTRIBUTION OF DOCUMENTS.
USE TECHNIQUES THAT STRUCTURE THE SYSTEM UNDER REVIEW WITH RESPECT TO DOCUMENT DISTRIBUTION AND SEGREGATION OF DUTIES AMONG PERSONNEL.
THESE CHARTS ARE ORGANIZED IN COLUMNS TO INDICATE THIS
2. COMPLIANCE TESTING
REQUIRES AN UNDERSTANDING OF THE CONTROLS WHICH ARE TO BE TESTED
TO DO THIS PLANNING THE AUDITOR MUST BE ABLE TO READ THE CHARTS THAT CURRENTLY EXIST THAT DEPICT THE SYSTEM AND HOW IT WORKS
3. WORKING PAPERS
RECORDS KEPT BY THE AUDITOR OF THE PROCEDURES AND TESTS APPLIED, THE INFORMATION OBTAINED, AND CONCLUSIONS DRAWN DURING THE AUDIT ENGAGEMENT
REQUIRED BY THE STANDARDS
USED AS PRINCIPAL RECORD OF WORK DONE
USED IN COURTS
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USE OF SYSTEM TECHNIQUES IN SYSTEM DEVELOPMENT
CONSISTS OF 3 BASIC PHASES
1. SYSTEM ANALYSIS
FORMULATING AND EVALUATING SOLUTIONS TO PROBLEMS-INVOLVES EXTENSIVE GATHERING AND ORGANIZING OF FACTS-GETTING AN OVERALL VIEW OF THE SYSTEM-DONE BY SYSTEM ANALYST
SYSTEM TECHNIQUES ARE FORMAL WAY TO ORGANIZE FACTS
2. SYSTEM DESIGN
PROCESS OF SPECIFYING THE DETAILS OF SOLUTION SPECIFIED BY THE SYSTEM ANALYSIS
EVALUATES EFFECTIVENESS AND EFFICIENCY OF ALTERNATIVE SOLUTIONS
3. SYSTEM IMPLEMENTATION
PLACING REVISED OR NEWLY DESIGNED PROCEDURES AND METHODS INTO OPERATION
INCLUDES TESTING THE SOLUTION PRIOR TO IMPLEMENTATION, DOCUMENTING THE SOLUTION, REVIEWING THE SYSTEM WHEN IT ACTUALLY BEGINS OPERATION--INCLUDES SELECTING AND TRAINING PERSONNEL, INSTALLING NEW COMPUTER EQUIPMENT, WRITING AND TESTING COMPUTER PROGRAMS, DOCUMENTING THE NEW SYSTEM
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THE SYSTEM TECHNIQUES
1. FLOWCHARTS
MOST COMMON SYSTEM TECHNIQUE
A FLOWCHART IS A SYMBOLIC DIAGRAM THAT SHOWS THE DATA FLOW AND SEQUENCE OF OPERATIONS IN A SYSTEM
COMMUNICATION DEVICE BETWEEN ACCOUNTANTS AND SYSTEMS PERSONNEL
KNOW KNOW KNOW THE FLOWCHARTING SYMBOLS
KNOW DEFINITIONS OF THESE SYMBOLS
NORMAL DIRECTION FOR THE FLOWCHART IS LEFT TO RIGHT AND TOP TO BOTTOM
A FLOWCHART IS A PICTURE OF THE ACCOUNTING INFORMATION SYSTEM
DOCUMENTING THE SYSTEM
1. CREATING AUDIT TRAIL
2. WORKING FROM THE FINANCIAL STATEMENTS TO THE DOCUMENTS (THE TRANSACTIONS) AND VICE VERSA
WANT TO SHOW HOW THE SYSTEM WORKS
1. DOCUMENTING THE PROCEDURES
AND THE PROCESSES
2. HOW TO DO THIS?
ASK THE CLIENT WHAT THEY THINK THEY ARE DOING NOW
UPDATE EXISTING DOCUMENTATION
3. AFTER WE DIAGRAM THE SYSTEM
WE CAN TEST THE SYSTEM!!
EVALUATE THE RISK OF ERRORS
INTERNAL CONTROLS
LACK OF INTERNAL CONTROLS (MLC)
A. DOCUMENT FLOWCHARTS
depict the flow of paper
arranged in columnar form - each column correspond to an organizational unit
why?
most common symbol is the ......
connecting lines show the movement of information and the distribution of copies of the same document
depict only one aspect of the system
ignore data capture,
editing
aggregation
which is shown on which flowchart?
more useful when accounting systems were primarily paper driven
1. The flowchart must be able to trace all important forms and documents from origin to final disposition.
2. It is useful to supplement the flowchart with copies of accounting documents for audit analysis and review and for audit trail evaluation.
3. The flowchart must clearly indicate what decisions are and what action is to be taken.
4. It is important to highlight audit trail in the flowchart.
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B. SYSTEMS FLOWCHARTS
IDENTIFIES THE OVERALL, BROAD FLOW OF OPERATIONS IN A SYSTEM.
SHOWS WHERE INPUTS ORIGINATE,
SEQUENCE AND MODE (MANUAL OR MACHINE) OF PROCESSING,
AND DISPOSITION OF OUTPUTS.
FOCUS ON MEDIA AND PROCESSING FUNCTIONS RATHER THAN DETAILED LOGIC OF THE SYSTEM.
show flow of data
and role of computer programs
in the processing of accounting information
C. PROGRAM FLOWCHARTS
MORE DETAILED CONCERNING INDIVIDUAL PROCESSING FUNCTIONS AND PROGRAMMING LOGIC.
CAN PROVIDE DETAIL FOR PROCESSING FUNCTIONS DEPICTED IN A SYSTEMS FLOWCHART OR USED ALONE
USED TO AID IN CODING THE SYSTEM FOR COMPUTER PROCESSING
2. DATA FLOW DIAGRAMS
USED BY SYSTEMS ANALYST TO DOCUMENT THE LOGICAL DESIGN OF A SYSTEM TO SATISFY THE USERS= REQUEST
HELPS TO DOCUMENT THE USER/SYSTEM ANALYST INTERFACE
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ENSURES THAT THE ANALYST HAS UNDERSTOOD THE USER=S REQUEST BY PROVIDING THE USER WITH THE ANALYST=S CONCEPTION OF THE USER=S PROBLEM
SYSTEM ANALYST OFTEN ACTS AS THE COMMUNICATION LINK BETWEEN THE USER OF THE COMPUTER SYSTEM AND THE PROGRAMMERS WHO ACTUALLY CODE AND DESIGN THE SYSTEM
4 SYMBOLS TO THE DFD
TERMINATOR
PROCESS
DATA STORE
DATA FLOW
Similar to the four basic flowcharting symbols
DESIGN OF THE DFD EMPHASIZES:
1. LOGICAL RATHER THAN PHYSICAL DESIGN
2. ANALYSIS OF DATA FLOWS
ANSWERS TRADITIONAL CRITICISM OF FLOWCHARTS THAT FLOWCHARTING SYMBOLS FOCUS ON DATA PROCESSING OPERATIONS AND PHYSICAL MEDIA
EXPLOSION AND EXPANSION PROCESS-- OCCURS WHEN SUCESSIVE DIAGRAMS ARE USED TO ILLUSTRATE DETAILS OF THE PRECEDING DIAGRAM
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DFD CONCENTRATES ON STORES OF DATA AND DECISION LOGIC
THIS MAKES IT EASIER FOR THE SYSTEM ANALYST TO IDENTIFY STORES OF DATA NEEDED FOR A PARTICULAR APPLICATION
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