Systems Documentation ACC539 – ACCOUNTING INFORMATION SYSTEMS SCHOOL OF ACCOUNTING AND FINANCE 1

Topics Goals At the completion of this topic, you should be able to: understand and explain the importance of systems documentation including the use of diagrams; describe, prepare and analyse data flow diagrams; and describe, prepare and analyse the differing types of flowcharts. ACC539 – ACCOUNTING INFORMATION SYSTEMS

Systems Documentation Set of documents and models Narratives, data flow models, flowcharts Is the blueprint or map that describes how the system is set up and operates Usage: Daily by new and existing employees Process re-engineering / improvement Management and implementation of controls Auditor review Essential to achieving the organisations objectives ACC539 – ACCOUNTING INFORMATION SYSTEMS

Why learn systems documentation? Sarbanes-Oxley states that management: is responsible for internal control system is responsible for assessing the effectiveness of the internal control (IC) System ASA (ISA NZ) 315 Par.18 states: - ‘The auditor shall obtain an understanding of the information system, including the related business processes, relevant to financial reporting…’ To complete these tasks, it is essential for management, the accountant, auditors and other staff to develop, implement and understand the different types of documentation. ACC539 – ACCOUNTING INFORMATION SYSTEMS

Systems Documentation Types of systems documentation studied in ACC539: Data flow diagram (DFD) Context Diagram Level 0 DFD Level 1 DFD Flowcharts Document flowcharts Systems flowcharts Program flowcharts ACC539 – ACCOUNTING INFORMATION SYSTEMS

When documenting systems…. All forms of systems documentation must be consistent with each other within an organisation as: They are different pictures of the same process / system. Base information required for all forms of systems documentation is the same. Generally prepared and revised with a software package e.g. Microsoft Office Visio Good starting point is a Narrative or a Narrative Table. ACC539 – ACCOUNTING INFORMATION SYSTEMS

Dataflow Diagrams (DFD’s)

Dataflow diagrams graphically describes the flow of data within an organisation. ACC539 – ACCOUNTING INFORMATION SYSTEMS

The four elements of a DFD are: Symbol Name Explanation Square: Entity Represents either a source of data OR a destination of data Can be a person or organisation Line: Data Flow Flow of data into or out of a process (can be a curved or straight line) Circle: Transformation Process Processes that transform data from inputs into outputs Parallel lines: Data Store Represents data at rest ie in storage ACC539 – ACCOUNTING INFORMATION SYSTEMS 10 Copyright ©2013 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781442542594/Romney/Accounting Information Systems/1e

Context Diagrams The context diagram: Highest level of data flow diagram (most general). Provides a representation of the system of interest. Purpose: show inputs and outputs into system (external entities = squares) Is an overview of the data flow but says nothing about what actually happens in the process. Does not depict data stores. There can be only 1 ‘System of Interest’ (ie only 1 circle) and no data stores. ACC539 – ACCOUNTING INFORMATION SYSTEMS

Guidelines for preparing a context diagram Identify the system of interest / process (circle). Identify the external entities (square). Identify any data flows between the external entities and the system of interest / process. Draw in the data flows (lines with arrow heads, labelled with the detail of the data flowing). ACC539 – ACCOUNTING INFORMATION SYSTEMS

Lets practice Prepare a context diagram of the following Cash Payments Process Receives an invoice Processes the invoice Makes a payment Ensures it is correctly recorded in the system Invoice details Payment Details 1.0 Cash Payments Vendor Accounts Department ACC539 – ACCOUNTING INFORMATION SYSTEMS Remittance advice and payment details Sample Context Diagram - Cash Payments Process

Levels of DFD’s Level-0: Level-1: Purpose: show all major activity steps of a system Characteristics: processes are labeled 1.0, 2.0… Level-1: Purpose: show one major activity divided into sub- activities Characteristics: processes are labeled 1.1, 1.2… ACC539 – ACCOUNTING INFORMATION SYSTEMS

DFD Level 0 and Level 1 Creation Guidelines Understand the system. Ignore certain aspects of the system. Determine system boundaries. Develop a context DFD. Identify data flows. Group data flows. Identify transformational processes. Group transformational processes. Identify all data stores. Identify all sources and destinations. Label all DFD elements. Subdivide DFD. Give each process a sequential number. Repeat the process. Prepare a final copy. ACC539 – ACCOUNTING INFORMATION SYSTEMS

Sample DFD Considine et al, Accounting Information Systems, page 106 ACC539 – ACCOUNTING INFORMATION SYSTEMS

Level 1 DFD Content ACC539 – ACCOUNTING INFORMATION SYSTEMS

Flowcharts

Flowcharts use a standard set of symbols to describe pictorially transaction processing procedures a company uses and the flow of data through a system. ACC539 – ACCOUNTING INFORMATION SYSTEMS

Types of Flowcharts Document: Illustrates the flow of documents through an organisation Useful for analysing internal control procedures. System: Logical representation of system inputs, processes and outputs Useful in systems analysis and design. Program: Represent the logical sequence of program logic. ACC539 – ACCOUNTING INFORMATION SYSTEMS

Flowcharts symbols Types of Symbols: Input / Output Processing Storage Miscellaneous ACC539 – ACCOUNTING INFORMATION SYSTEMS

Flowchart symbols cont.. ACC539 – ACCOUNTING INFORMATION SYSTEMS

Guidelines for Preparing Flowcharts Manual processing symbols Page connectors Use arrowheads on all flow lines Multiple pages Show documents or reports in the column where they are created Files Draw a rough sketch of the flowchart Redesign the flowchart Verify its accuracy Draw a final copy Understand the system before flowcharting it Identify entities to be flowcharted Divide the flowchart into columns Flowchart normal flows of operations Organise the flowchart Give the flowchart a clear beginning and ending Use the standard flowcharting symbols Clearly label all symbols Multiple copies of documents ACC539 – ACCOUNTING INFORMATION SYSTEMS

Document Flowchart ACC539 – ACCOUNTING INFORMATION SYSTEMS

Document Flowchart cont… ACC539 – ACCOUNTING INFORMATION SYSTEMS

System Flowchart ACC539 – ACCOUNTING INFORMATION SYSTEMS

Program Flowchart ACC539 – ACCOUNTING INFORMATION SYSTEMS

What are the errors in this context diagram? ACC539 – ACCOUNTING INFORMATION SYSTEMS Considine et al, Accounting Information Systems, problem 5.3

Comprehensive Question Accuflow Cash Payments SoftData, a vendor, sends an invoice to Accuflow for data warehousing support services. The invoice is sent directly to Megan Waters, the accounts payable clerk, who manually records the invoice in the accounts payable subsidiary ledger. Once the invoice is recorded, it is forwarded to Stan Phillips, the cash payments clerk, for processing. Stan prepares a cheque to pay the invoice and sends the cheque and invoice to John Sterling, the company treasurer. John approves and signs the cheque and cancels (marks as ‘paid’) the invoice. John then mails the cheque back to SoftData and returns the cancelled invoice to Stan for recording in the cash payments journal and filing. Once a week, Megan manually posts payments from the cash payments journal to the accounts payable subsidiary ledger. ACC539 – ACCOUNTING INFORMATION SYSTEMS

Comprehensive Question cont… Prepare a document flowchart, a context diagram, a level 0 DFD, and a level 1 DFD for the Accuflow cash payment process. ACC539 – ACCOUNTING INFORMATION SYSTEMS

Discussion Question 3.2 Do you agree with the following statement? “Any one of the systems documentation procedures can be used to adequately document a given system.” Explain. ACC539 – ACCOUNTING INFORMATION SYSTEMS

Post Workshop Activities Complete all exercises on your activity sheet which were not completed in your workshop. If you need to further practice drawing systems documentation, questions Problem 3.11 on page 84 and 85 should be attempted. ACC539 – ACCOUNTING INFORMATION SYSTEMS

Before your next class you need to… Complete the post workshop activities for this week Prepare a summary for this topic. Complete the readings for next week. ACC539 – ACCOUNTING INFORMATION SYSTEMS

ACC539 – ACCOUNTING INFORMATION SYSTEMS