1. Chapter 8 System Implementation and Operation

2. Learning Objectives l To discover which activities take place during the third and fourth phases of the SDLC. l To know how auditors participate in system implementation l To understand how to do a post- implementation review l To learn how to properly account for the costs of an accounting information system

3. SDLC Systems Master Plan Systems Analysis System Design System Implementation System Operation

4. System Implementation Phase l Period of time during which a working system is produced and placed in operation. l Begins with acceptance of design l Ends with acceptance of the system by the user

5. Activities during Implementation l Equipment Installation l Programming l Training l Testing l Conversion

6. Equipment Installation l Site Preparation »Trivial for Micro-computers »More involved for mainframes –water cooling –air conditioning –cabling –fire proofing l Acceptance tests

7. Programming l Develop Program Logic »Modular »Structured programming –only one entry and one exit point –sequence, selection, iteration constructs (No gotos) l Code the Program »Top down coding »Internal documentation l Debug the Program »Structured Walkthrough »Test the Program l Document the Program

8. Training l User training »Procedures manual –managers –supervisors –clerks l Operations training »Operations manual –Data entry clerks –Computer operators –Technical support personnel –Data control clerks

9. Testing l String Testing »Programs may run in series, with output of one program becoming input to another program. String testing is performed to test if the entire series of programs works properly. l System Testing »Test of computer and manual procedures.

10. Conversion l File conversion l Volume Testing »to test how well the system works under an actual processing load. l System Changeover »Direct Changeover »Pilot System »Parallel Operation »Phase-In

11. Auditor Involvement l During System Testing »review adequacy of test data »review test results l During Conversion »review conversion plan prior to conversion »review accuracy of new data files

12. System Operations Phase l Period of time during which the system functions as a provider of accounting information.

13. Activities during Operations l Post-Implementation Review l System Maintenance l Accounting for systems costs

14. Post-Implementation Review l An analysis and appraisal of a new system a few months after conversion. l Performed by a review team »Includes systems analysts involved »Includes Internal auditor (impartial) l Focus on appraisal, not learning the design of the system

15. Procedures During Post Implementation Review l Estimate Costs and Benefits l Evaluate Adequacy of Documentation l Evaluate User Satisfaction l Evaluate Effectiveness of Internal Controls

16. Reasons for Post- Implementation Review l Provides information for future projects l Prompt correction of shortcomings l Motivation for good design l Opportunity to evaluate project team members

17. System Maintenance l Equipment Maintenance l Software Maintenance »Planned System Improvements »Unplanned Changes

18. Accounting for Systems Cost l Development Costs l Operating Costs

19. How to handle Development Costs ? Ê Allocate to user department proposing the system »Provides incentive to limit development costs »Provides incentive to avoid unprofitable systems »May prevent development of beneficial systems Ë Include in General Overhead »Recognizes the system’s benefits to entire organization »Provides little user department incentive to limit development costs.

20. How to handle Operational Costs ? l Allocate to user departments using a charging algorithm

21. Basis of Allocations l Cost-Based Rates »All MIS expenditures borne by those departments consuming MIS services »Allocated costs are uncontrollable in user departments l Market Rates »Allocated costs are objectively determined »Provides incentive to limit MIS expenditures »A market rate for equivalent services may not exist l Standard Rates »Provides recovery of MIS expenditures over long term »Provides incentive to limit MIS expenditures »May be difficult to set