ACC3385 Ch3
true statements (2)
- a flowchart is 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 flow of documents and data through a system - flowcharts are easy to prepare and revise when the designer utilizes a flowcharting software package.
all of the following are recommended guidelines for making flowcharts more readable, clear, concise, consistent, and understandable
- divide a document flowchart into columns with labels - design the flowchart so that flow proceeds from top to bottom and from left to right - show the final disposition of all documents to prevent loose ends that leave he reader dangling.
true statements
- flowcharts make use of many symbols. - a document flowchart emphasizes the flow of documents or records containing data.
All of the following are guidelines that should be followed in naming DFD data elements
- process names should include action verbs such as update, edit, prepare, and record - make sure the names describe all the data or the entire process. - choose active descriptive names.
•There are four types of flowcharting symbols:
-Input/output symbols -Processing symbols -Storage symbols -Flow and miscellaneous symbols
Guidelines for Drawing a DFD
1. Understand the system 2. Ignore certain aspects of the system 3. Determine system boundaries 4. Develop a context diagram 5. Identify data flows 6. Group data flows 7. Identify transformation processes 8. Group transformation processes 9. Identify all files or data stores 10. Identify all data sources and destinations 11. Name all DFD elements 12. Subdivide the DFD 13. Give each process a sequential number 14. Refine the DFD 15. Prepare a final copy
•Prepare final DFD
Avoid crossing data flow lines. •It is okay to repeat data stores, sources and destinations.
•Refine each DFD.
DFD should read from left to right, top to bottom.
Subdividing the DFD
DFDs are subdivided into successively lower levels to provide ever-increasing amounts of detail, because few systems can be fully diagrammed on one sheet of paper.
Internal Control Testing
Design Effectiveness + Operating Effectiveness = Internal Control Effectiveness -audits focus on Internal Control Effectiveness
Examples of Transformation Processes (Information Processing Activities)
Examples: Document preparation Data entry Calculation Sorting Filing Summarizing Verification Classifying Retrieving information NOT a transformation process: Sending data Receiving data
•Input/output symbols -
Input/output symbols indicate the type of device or media that provides input to or records output from a process. •Document •Multiple Copies of One Document •Electronic Output •Electronic Data Entry •Electronic Input and Output Device
symbols are divided into four categories
Input/output symbols show input to or output from a system. Processing symbols show data processing, either electronically or by hand. Storage symbols show where data is stored. Flow and miscellaneous symbols indicate the flow of data, where flowcharts begin or end, where decisions are made, and how to add explanatory notes to flowcharts.
•Two types of Data Flow Diagrams
Physical DFD (will not draw) Logical DFD
•Electronic Output
Represents information displayed by an online output device such as a terminal, monitor, or screen. anything seen on a computer monitor
STORAGE SYMBOLS
Storage symbols indicate the type of device used to store data while the system is not using it. •Database •File •Journal/Ledger
An entity can be both
a source and a destination. represented by squares
The Sarbanes-Oxley Act (SOX) of 2002 requires
an internal control report in public company annual reports 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. auditor must: -evaluate management's assessment of the company's internal control structures and attest to its accuracy. -include a specific notation about significant defects or material noncompliance -both the company and its auditors have to document and test the company's internal controls
A document flowchart shows the flow of documents and information among
areas of responsibility in an organization •These flowcharts trace a document from cradle to grave and show: •Where a document comes from •Where it's distributed •How it's used •It's ultimate disposition •Everything that happens as it flows through the system
how are data sources and destinations represented in a data flow diagram?
as a square
Common DFD Mistakes: When there are no outputs from a process. This is a called a ______ process.
black hole outside the system
three common systems documentation tools:
data flow diagrams, flowcharts, and business process diagrams.
arrow symbol
data flows •Represent the flow of data between sources and destinations, processes, and data stores -into or out of a process is represented by curved or straight lines with arrows
square symbol
data sources and destination -not originating in our system the people and organizations that send data to and receive data from the system are represented by square boxes. data destinations are also referred to as data sinks. •An item can be both a source and a destination.
parallel lines
data stores •Appear as two horizontal lines •Represent a temporary or permanent repository of data •Should describe the data stored. File or database
system flowchart
depicts the relationships among system input, processing, storage, and output System flowcharts are used to describe data flows and procedures within an AIS
which of the following flowcharts illustrates the flow of data among areas of responsibility in an organization?
document flow
DFD is not good for:
documenting internal controls
DFD is not used for
documenting internal controls
•SOX (2002)
effectively requires that publicly-traded corporations and their auditors document and test the company's internal controls.
•Internal control flowcharts are document flowcharts used to
evaluate the adequacy of internal controls, such as segregation of duties or internal checks. •They can reveal weaknesses or inefficiencies such as: •Inadequate communication flows •Unnecessarily complex document flows •Insufficient segregation of duties •Procedures that cause wasteful delays
A DFD is a representation of which of the following?
flow of data in an organization
flowchart
graphical description of a system. an analytical technique that uses a standard set of symbols to describe pictorially some aspect of an IS in a clear, concise, and logical manner. Document flowchart System flowchart Program flowchart
context diagram
highest-level DFD -a summary-level view of a system -showing the data processing system -its input(s) and output(s) -their sources and destinations depicts a data processing system and the entities that are the sources and destinations of system inputs and outputs do not want complex! should be simplifying.
document flowchart
illustrates the flow of documents and data among areas of responsibility within an organization (between departments) trace a document from its cradle to its grave, showing where each document originates, its distribution, its purpose, its disposition, and everything that happens as it flows through the system
program flowchart
illustrates the sequence of logical operations performed by a computer in executing a program describes the specific logic used to perform a process shown on a system flowchart.
triangle symbol
internal control an internal control. the internal controls are numbered and explained in an accompanying table.
internal control flowchart
is used to describe, analyze, and evaluate internal controls. identify system weaknesses or inefficiencies
FLOW AND MISCELLANEOUS SYMBOLS
may indicate the flow of data and goods, the beginning or end of the flowchart, the location of a decision or an explanatory note. •Document or Processing Flow •On-page connector •Off-page Connector •Terminal •Decision •Annotation
Common DFD Mistakes: When there are no inputs into a process. This is a called a ______ process.
miracle where is the process?
documentation
narratives, flowcharts, diagrams, and other written materials that explain how a system works -the who, what, when, where, why, and how of data entry, data processing, data storage, information output, and system controls. communicates how the system works
•Auditing Standard No. 5
promulgated by the PCAOB requires that the external auditor express an opinion on the client's system of internal controls.
the documentation skills that accountants require vary with their job function. however, all accountants should at least be able to do which of the following?
read documentation to determine how the system works
•Give each process a
sequential number.
process
the action that transforms data into other data or information
Auditing standards require that independent auditors understand
the automated and manual internal control procedures an entity uses. -use business process models or flowcharts to document a system -such graphic portrayals more readily reveal internal control weaknesses and strengths.
data source
the entity that produces or sends the data that is entered into a system
data destination
the entity that receives data produced by a system
data flow
the movement of data among processes, stores, sources, and destinations Data that pass between data stores and a source or destination must go through a data transformation process. only exception is data flow between a process and a data store -If two or more data flows move together, a single line is used. -If the data flow separately, two lines are used
data store
the place or medium where system data is stored (repository of data) -data stores (H) are represented by horizontal lines
•Physical DFD represents
the system's internal and external entities along with the flows of data into and out of these entities technical details of how it all works where, how, by whom
•Logical DFD represents
the system's processes and data stores along with the flows of data into and out of the processes and data stores most relevant! "what" the system is doing -no more than 7 processes -details are on separate diagrams
the context diagram's main purpose is
to put a scope (boarder) around the system
document flowcharts are useful for
training
circle symbol
transformation processes •Appear as circles •Represent the transformation of data on a logical DFD. •Will represent an entity on a physical DFD. •Use action verbs to describe the process. the processes that transform data from inputs to outputs are represented by circles. they are often referred to as bubbles
a DFD consists of the following four basic elements: data sources and destinations, data flows, transformation processes, and data stores. Each is represented on a DFD by a different symbol.
true
documentation methods such as DFDs, BPDs, and flowcharts save both time and money, adding value to an organization.
true, a picture is worth a thousand words: many people learn more and learn it more quickly by studying the DFD, BPD, or flowchart of a system than by reading a narrative description of the same system
narrative description
written, step-by-step explanation of system components and how they interact -smaller CPA firms / small systems -doesn't show if something is missing -the person writing the narrative will leave out the "obvious to them" items
data flow diagram (DFD)
•A data flow diagram (DFD) graphically portrays a business information processing activities, stores of data, and flows of data among those elements. It is used to: •Document existing systems •Plan and design new systems •There is no black-and-white approach to developing a DFD.
•How do accountants use documentation?
•At a minimum, they have to read documentation to understand how a system works (e.g. auditors must assess risk). •They may need to evaluate the strengths and weaknesses of an entity's internal controls. •Requires heavy reliance on documentation •They may peruse documentation to determine if a proposed system meets the needs of its users. •They may prepare documentation to: •Demonstrate how a proposed system would work •Demonstrate their understanding of a system of internal controls
•Documentation techniques are necessary tools for accountants:
•Auditing standards require that auditors understand the automated and manual procedures an entity uses. •This understanding can be gleaned through documenting the internal control system—a process that effectively exposes strengths and weaknesses of the system.
•Journal/Ledger {we won't use}
•Can represent any input or output on a program flowchart. •Also represents accounting journals or ledgers in a document flowchart.
•Electronic Input and Output Device
•Combines the display and online keying symbols to represent terminals and personal computers.
•On-page connector
•Connects processing from one location to another on the same page. Used to avoid crisscrossing lines.
•Off-page Connector
•Connects the processing flow between two different pages. •Signals the exit from one page and the corresponding entrance on another page.
Name all DFD elements
•Data flows - describe the data (e.g. sales order, check, etc.) •Processes - use active word to describe the process (e.g. update, prepare, record, etc.) Data stores - describe data in the data store (e.g. accounts receivable, sales event data, etc.)
•Few systems can be fully described in one diagram.
•Different users may need different levels of detail about data flows and processing. •Consequently, DFDs are subdivided into successively lower levels to provide increasing amounts of detail.
•Subdivide the DFD.
•General rule of thumb is to avoid having more than 7 processes on a DFD.
•Multiple Copies of One Document
•Indicates multiple copies of a paper document or report. The document copies should be numbered in the upper, right-hand corner.
•As with DFDs, you can't effectively prepare a flowchart if you don't understand the system, so:
•Interview users, developers, auditors, and management •Administer questionnaires •Read through narratives •Walk through systems transactions
Flowcharts
•Presents a more comprehensive picture (compared to a DFD) of a system as it shows both the physical and logical aspects of a system. physical adds to the logical and documents everything
PROCESSING SYMBOLS
•Processing symbols indicate the type of device used to process the data or whether the data is processed manually. •Computer Processing •Manual Operation
•Annotation
•Provides for the addition of descriptive comments or explanatory notes as clarification. connects to a process symbol
•Decision {won't use}
•Represents a decision-making step. •Used in a program flowchart to show branching to alternate paths.
•Document
•Represents a document or report that is prepared by hand or printed by a computer.
•File
•Represents a file of documents that are manually stored and retrieved. NOT a digital file •Letter indicates the ordering sequence: •A = Alphabetic order •D = Date order N = Numeric order
•Computer Processing
•Represents a process performed by a computer, which usually results in a change in data or information.
•Manual Operation
•Represents a processing operation that is performed manually.
•Electronic Data Entry
•Represents data entry by an online device such as a terminal or personal computer.
•Database
•Represents data stored on a magnetic disk or drive. anything stored in a computer system
•Terminal
•Represents the beginning, end, or a point of interruption in a process or program. •Also used to indicate an external party.
•Document or Processing Flow
•Represents the direction of processing or document flow. •Normal flow is top to bottom and left to right.
System Flowcharts Describes the data processing cycle of
•a process: •Input •Process •Output •Storage {won't draw}
PROGRAM FLOWCHARTS
•sequence of logical operations performed by a computer in executing a program. Also follow an input - process - output pattern. -what is going on inside one specific program -makes it easier to understand what code says {won't draw}
