Chapter 3

flow and miscellaneous symbols

-6 shapes: 1. decision *should be yes or no- ex. yes: send to slam or no: send it back 2. terminator *beginning and end of flowchart 3. solid arrow: document or processing flow 4. on-page connector *need to send data from one point of flowchart to another 5. off-page connector *need to connect to dif page 6. dashed arrow: data/info flow -flow of data and goods is an arrow -explanatory note: need to talk more about

data flow diagrams

-A data flow diagram (DFD) ________________ describes how ____________ _______________ within an organization. -DFDs are used to: Document existing systems & Plan and design new systems -DFDs show where the data sit & where appropriate controls should be implemented.

background: In a flowchart, what is a decision symbol & why/how do I use it?

-A decision is represented with a diamond that shows a "yes/no" question. -The answer to that yes/no question determines the document's path or the process outputs -Generally, the decision will be preceded by a process

document flowcharts

-A document flowchart shows the flow of documents and data among areas of responsibility in an organization. -These flowcharts trace a document from cradle to grave and show: *Where a document comes from (order come from somewhere- ex. customer) *Where it's distributed *How it's used *It's ultimate disposition *Everything that happens as it flows through the system -use swim lanes: picker, packer, slam, and ship

background: Flowcharts vs. DFDs

-DFDs place a heavy emphasis on the logical aspects of a system. -Flowcharts place more emphasis on the physical characteristics of the system -Changes in the physical characteristics of the process do affect the flowchart but have little or no impact on the DFD. -The DFD focuses more on the logic. -When deciding which tool to employ, consider the information needs of those who will view it.

Subdividing a DFD

-Few systems can be fully diagrammed on one sheet of paper & users have needs for differing levels of detail. -DFDs can be subdivided into successively lower levels to provide increasing amounts of detail. -The highest level of DFD is called a _______________________. -Provides a summary level view of the system -Depicts a _____________________________ & the __________________ that are (1) _______________________________ & (2) ____________________

background: flowcharts 2

-Flowcharts inform the reader: *What is happening *When it's happening *Who is doing it *How inputs and outputs are handled and distributed

document flowcharts 2

-Internal control flowcharts are document flowcharts used to evaluate the adequacy of internal controls, such as segregation of duties or internal checks. (to avoid fraud) -They can reveal weaknesses or inefficiencies such as: *Inadequate communication flows *Unnecessarily complex document flows *Procedures that cause wasteful delays -Document flowcharts are also prepared in the system design process.

narratives 2

-Keys for a successful interview *Develop open ended questions *Ask appropriate questions... 1 at a time *Listen carefully & actively to the answer *Ask follow-up questions *Take handwritten notes *Confirm your understanding -after do interview, prepare narrative -narratives very detailed

background: narratives

-Processes are documented in paragraph form. All of the key information (e.g., who, what, when, where, why) is collected - usually from an interview - and written down and saved with the audit work papers.

background: flowcharts 3

-Reasons to use Flowcharts: *To be able to visually look at process and understand its work flow *Ease of use for communication with process owners (in relation to *To spot potential risks *To dictate where controls are or where they should be *To determine if a process needs to be re-engineered to increase efficiency *To identify any possible improvements

flowchart

-The most commonly used (graphical) documentation tool is the Flowchart. -A flowchart is a graphical representation of a system that describes the physical relationships between entities -Can be used to represent (1) manual activities and/or (2) computer processing activities -Flowcharts use a set of standard symbols to depict processing procedures and the flow of data. -Every shape on a flowchart depicts a unique operation, input, processing activity, or storage medium -3 dif types of flowcharts- document flowchart used the most

documentation

-covers the who, what, when, where, why, and how of data entry, processing, storage, info output, and system controls

background: system flowchart

-depict the relationships among the input, processing, and output of an AIS. -A system flowchart begins by identifying the inputs that enter the system and their origins. The input can be new data entering the system, data stored for future use, or both. The input is followed by the processing portion of the flowchart (the steps performed on the data). The resulting new information is the output component, which can be stored for later use, displayed on a screen, or printed on paper. Often the output from one process is the input for another process. -Note: The logic the computer uses to perform the processing task is shown on a program flowchart, not a system flowchart.

background: DFD

-graphically describes the flow of data within an organization. They are used to document existing systems and to plan and design new ones. -DFDs do not include process controls. They only focus on the data, where it comes from, what happens to it (processing) and where it goes. -The highest level of a DFD is called a context level diagram and it provides only a summary level view of the process. -DFDs can be subdivided to show more detail.

background: program flowchart

-illustrates the sequence of logical operations performed by a computer in executing a program. -A program flowchart describes the specific logic to perform the processes in the system flowchart (that is, the internal computer logic, calculations, etc.)

background: documentation

-includes narratives, flowcharts, diagrams and other written materials that explain how a system works. It should include the: who, what, when, where, why, and how data is entered, stored and processed, how information is generated and the controls involved.

input/output symbols

-indicate type of device or media that provide input to or records output from a process -5 shapes: 1. document 2. multiple documents *3 way match: for purchasing process (use this symbol- top: order, next: receiving report, next: invoice) 3. display *something shows up on computer screen, ex. which box to use 4. input/output *electronic 5. online keying *enter something into system, ex. packer enters that picked up wrong item

processing symbols

-indicate type of device used to process the data or whether the data is processed manually -4 shapes: 1. computer processing 2. manual operation 3. auxilliary operation 4. predefined process

storage symbols

-indicate type of device used to store data while the system is not using it -3 shapes: 1. magnetic disk/drive 2. magnetic tape 3. file

background: flowcharts

-sometimes called process maps -an analytical technique used to describe some aspect of an information system in a clear, concise and logical manner. -Flowcharts use a standard set of symbols to describe pictorially the transaction processing procedures a company uses and the flow of data through a system.

background: document flowchart

-this is type that is most commonly used and the one you will probably prepare as part of your job. -They trace the flow of documents from cradle to grave. They show where each document originates, its distribution, the purposes for which it is used, its ultimate disposition, and everything that happens as it flows through the system. -A document flowchart is particularly useful in analyzing the adequacy of control procedures in a system, such as internal checks and segregations of functions. Document flowcharts used to describe and evaluate internal controls are referred to as internal control flowcharts. -The document flowchart can reveal weaknesses or inefficiencies in a system, such as inadequate communication flows, unnecessary complexity in document flows, or procedures responsible for causing wasteful delays. -Despite the title, "document flowchart," you can (will) have manual and electronic inputs/outputs/ processes in a document flowchart.

narratives

-where does the content come from: interviews and organization's documents *policies and procedures, minutes from meetings -what makes a successful interview *asking carefully planned questions *actively assessing each response *using effective interviewing skills

data flow diagrams: 4 basic elements

1. 2. 3. 4.

background: Documentation techniques are used extensively by accountants: 2

1. SAS 94 (The effect of information technology on the auditor's consideration of internal control in a financial statement audit) requires that independent auditors understand the automated and manual internal control procedures of an organization. One of the ways this is done is to is to use flowcharts to document the internal control system, as weaknesses and strengths are more easily spotted from these illustrations. 2. SOX requires that management of public companies include in its annual report and internal control report that (1) states that management is responsible for establishing and maintaining an adequate internal control structure and (2) assesses the effectiveness of the company's internal controls. SOX also requires that the company's auditor must evaluate management's assessment of the company's internal control structures and also attest to its accuracy. The auditor's attestation should include a specific notation about any significant defects or material noncompliance found during the internal control tests.

guidelines from preparing flowcharts 6

18. If a flowchart takes more than one page, label the pages s 1 of 5, 2 of 5, 3 of 5.... 19. Show documents or reports first in the column where they are created. 20. Start with a rough draft; then redesign to avoid clutter and crossed lines. 21. Verify the accuracy of your flowchart by reviewing it with users, etc. 22. Place the flowchart name, the date, and the preparer's name on each page of the final copy.

guidelines from preparing flowcharts

1. Understand the system: *Interview users, developers, auditors, and management *Administer questionnaires *Read through narratives *Walk through systems transactions 2. Identify: *Entities to be flowcharted, e.g., departments, functions, external parties (ex. payroll and a/p) *Documents or information flows *Processes (ex. actually processing payroll)

background: 3 types of flowcharts

1. document 2. system 3. program

background: 2 main types of graphical documentation

1. flowchart 2. DFD

flowchart: 4 basic types of shapes

1. input/output symbols 2. processing symbols 3. storage symbols 4. flow and miscellaneous symbols

documentation: 4 types of tools

1. narratives (written descriptions) 2. flowcharts 3. diagrams (DFD and entity- relationship diagrams) *helps to develop database 4. other written materials *policies and procedures from client, minutes from board meeting

4 things accountants use documentation to do

1. read documentation to understand how a system works (clients will have prepared documentation) 2. evaluate the strengths and weaknesses of an entity's internal controls (identify risk) *requires heavy reliance on documentation 3. peruse documentation to determine if a proposed system meets the needs of its users 4. prepare documentation to: *demonstrate how a proposed system would work *demonstrate their understanding of a system of internal controls

guidelines from preparing flowcharts 5

13. Do not connect two documents except when forwarding to another column (i.e., if a document is sent to another department). 14. When using multiple copies of a document, place document numbers in the top right-hand corner o the symbol. The document number should accompany the symbol as it moves through the system. 15. When a document is forwarded, show it in both locations. 16. Show on-page connectors and label them clearly to avoid excess lines 17. Use off-page connectors if the flow goes to another page

guidelines from preparing flowcharts 2

3. Use separate columns for the activity of each entity. *Example: If there are three different departments or functions that "do" things in the narrative, there would be three columns on the flowchart. *These are also called "swim lanes" & can be oriented vertically or horizontally ---put title of dept at top of swim lane -the flowchart reflects the physical system

guidelines from preparing flowcharts 3

4. Flowchart the normal course of operations, and identify exceptions with annotations. 5. As much as possible, the flow should go from top to bottom and left to right 6. Give the flowchart a clear beginning and ending. Designate where each document originated, and show the final disposition of all documents so there are no loose ends that leave the reader hanging. 7. Use standard flowcharting symbols, and draw with a template or computer. *There may be commonly accepted symbols, or flowcharting practices, mandated by your firm. 8. Clearly label all symbols. Use annotations if necessary to provide adequate explanation.

guidelines from preparing flowcharts 4

9. One approach you can use is to read through the narrative and for each step define: *What was (were) the input(s) *What process was carried out *What was (were) the output(s) -Note on the flowcharts below that the flow sequence is input—process—output. 10. Every process should have at least one input and at least one output. 11. Show all data entered into or retrieved from a computer file as passing through a process first. 12. Do not show process symbols for: *Forwarding a document to another entity *Filing a document -Instead, you should show it as output to a file or outside entity. -should never have 2 docs next to each other without process taking place -input ---> process ---> output