Systems Techniques

and Documentation

Chapter 2

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Learning Objective 1

Characterize the use of systems

techniques by auditors and
systems development personnel.

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Users of Systems Techniques

Systems techniques are tools.
Analysis

Design

Documentation

They are largely graphical (pictorial) in nature.

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Use of Systems
Techniques in Auditing

What are the two basic components

of an auditing engagement?
1. The interim audit

2. The financial
statement audit

Compliance testing

Substantive testing

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Internal Control Evaluation

Auditors are typically concerned with the
flow of processing and distribution of
documents within an application system.

Auditors use charts to analyze the

distribution of documents in a system.

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Compliance Testing
Compliance testing requires an understanding
of the controls that are to be tested.
Auditors must have a basic understanding
of systems techniques.

input-process-output (IPO)
hierarchy plus input-process-output (HIPO)
logical data flow diagrams (DFD)
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Working Papers
These are the records kept by an auditor
of the procedures and tests applied, the
information obtained, and conclusions
drawn during an audit engagement.

Required by professional standards

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Working Papers
What are some of the systems techniques
used by auditors to document and analyze
the content of working papers?

internal control questionnaires

analytic flowcharts
system flowcharts
branching and decision tables
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Use of Systems Techniques

in Systems Development
What are the three phases of a
systems development project?
1. Systems analysis
2. Systems design

3. Systems implementation
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Systems Analysis
Much of a systems analysts job involves
collecting and organizing facts.

Systems techniques examples:

Interviewing

Observations

Document reviews

Matrix

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Systems Design
A blueprint must be formulated
for the complete system.
Input/output (matrix) analysis
Systems flowcharting

Data flow diagrams

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Systems Implementation
Systems implementation involves the
actual carrying out of the design plan.
What systems techniques serve
as a documentation tool?
Program flowcharts

Decision tables
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Use of Systems Techniques by

Sarbanes-Oxley Act (SOX) Compliance
Participants
System documentation is the underpinning support
of the internal control and
process documentation requirements set by SOX.

Organizations use specially-designed application

software packages to automate SOX compliance
requirements and facilitate continuous
updating of business process documentation.
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Learning Objective 2

Describe the use of flowcharting

techniques in the analysis of
information processing systems.

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Systems Techniques
What is a flowchart?

A flowchart is a symbolic diagram

that shows the data flow and
sequence of operations in a system.

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Basic Symbols
Input/output
Process
Flowline

Annotation
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Specialized Input/Output
Symbols
Punched
card
Online
storage

Magnetic
tape
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Punched
tape
Magnetic
disk

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Specialized Input/Output
Symbols
Document
Manual
input

Communication
link
Offline
storage

Display
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Specialized Process Symbols

Decision

Auxiliary
operation

Predefined
process

Merge

Preparation

Extract

Manual
operation

Collate

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Sort
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Additional Symbols
Connector
Off-page
connector

Terminal

Transmittal tape

Parallel mode

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Symbol Use in Flowcharting

Symbols are used in a flowchart to
represent the functions of an
information or other type of system.
Normal direction of flow is from
left to right and top to bottom.

Open arrowheads should be used

on reverse-direction flowlines.
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Symbol Usage Illustration

Normal Direction of Flow
Invoice

Review
and
approve

Approved
invoice

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Symbol Usage Illustration

Reverse Flow Shown with Arrowheads

Approved
invoice

Review
and
approve

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Invoice

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Symbol Usage Illustration

Use of Connector Symbol
Stores

Purchasing

Approved
invoice

Invoice

A
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Symbol Usage Illustration

Bidirectional Flow Shown with Arrowheads
Requisition
Prepare
purchase order
and update
vendor files

Vendor
files

Purchase
order
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Learning Objective 3

Define common systems techniques,

such as HIPO charts, systems
flowcharts, and logical
data flow diagrams.
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IPO and HIPO Charts

These charts are used primarily by
systems development personnel.
At the most general level of analysis,
only the basic input-process-output
relations in a system are of concern.

Additional processing detail is provided

by hierarchy plus input-process-output.
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IPO Chart

System: Payroll
Author: Mr. Foxx Description: Calculate
Gross Pay
Chart Number: 3.1
Input
Process
Payroll job record Accumulate hours
Payroll master file
worked
Find correct pay rate
Compute gross pay

Date: 6/9/0X
Output
Gross pay records
Payroll master file
Error messages

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HIPO Illustration
1.0

Payroll
Payroll system
system
2.0

Data
Data preparation
preparation

3.0

Processing
Processing

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4.0

Review
Review

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HIPO Illustration
3.1

3.2

Calculate
Calculate
gross
gross pay
pay

Calculate
Calculate
net
net pay
pay

3.11

Accumulate
Accumulate
hours
hours worked
worked

3.12

Find
Find correct
correct
pay
pay rate
rate

3.13

Compute
Compute
gross
gross pay
pay

Each numbered module would be detailed in an IPO chart.

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Systems and Program

Flowcharts
A systems flowchart identifies the overall
or broad flow of operations in a system.

A program flowchart (block flowchart)

is more detailed concerning
individual processing functions.

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Logical Data Flow

Diagram Symbols

Name

Symbol

Meaning

Terminator

Represents sources and

destinations of data

Process

Task or function
being done

Data store

A repository of data

Data flow

Communication
channel

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Data Flow Diagram

Timekeeping
Timekeeping

Payroll
data

Process
Process
payroll
payroll
data
data

Payroll
data

Paychecks Employees
Employees

Payroll
details

Payroll Data
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Data Flow Diagram Expanded

Current
status

Timekeeping
Timekeeping

Payroll
data

Employee
data

Verify
Verify
payroll
payroll
data
data
P1

Data
valid

Valid
payroll data

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Data Flow Diagram Expanded

Employee
data

Net pay and

deductions

Data to
process

Calculate
Calculate Paychecks Employees
Employees
pay
pay
P2

Valid
payroll data
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Data Flow Diagram

Expanded Further
Update
Update
employee
employee
files
files

Current
amounts

Process
Process
payroll
payroll
journal
journal

Details

Journal
data

Net pay and

deductions

Compute
Compute
net
net pay
pay

Paychecks

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Employees
Employees

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Analytic, Document, and Forms

Distribution Flowcharts
An analytic flowchart is similar
to a systems flowchart in level
of detail and technique.

A document flowchart is similar to an

analytic flowchart but contains less
detail about the processing functions
of each entity shown on the chart.
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Analytic, Document, and Forms

Distribution Flowcharts
The forms distribution chart illustrates
the distribution of multiple copy
forms with an organization.

Purchase

Receive

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Analytic Flowchart
Purchasing

Approve
Approve
vendor
vendor
list
list

Suppliers
Select
Select
vendors
vendors

Prepare
Prepare
quotation
quotation
requests
requests

Requests
Requests
for
for
quotation
quotation

Requests
Requests
for
for
quotation
quotation

Quotations
Quotations

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Analytic Flowchart
Purchasing
Quotations
Quotations

Select
Select
bid
bid

Quotations
Quotations

Prepare
Prepare
purchase
purchase
order
order
Purchase
Purchase
order
order

Suppliers

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Purchase
Purchase
order
order
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Document Flowchart
Controller
Accounts
Payable
Purchase
Purchase
requisition
requisition
22
To Vendor

Purchase
Purchase
order
order
55

Vice President Manufacturing

Purchasing Agent

Receiving

Purchase
Purchase
requisition
requisition
11
Purchase
Purchase
order
order
11
2

Stores
Purchase
Purchase
requisition
requisition
11
2

Purchase
Purchase
order
order
33
3

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Purchase
Purchase
order
order
44

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Forms Distribution Chart

Purchasing Inventory
Purchase
order copy
1
2

Payables

Production Accounting

1
2

3
4

3
4

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Analytical Flowcharting
Illustration

Symbol selection

System analysis

Drawing the flowchart

Sandwich rule

Use of connector symbol

Entity-column relations

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Unified Modeling Language

(UML)
UML is a technology that assists in the specification,
visualization, and documentation of models
developed to structure and design software systems

UML 2.0 defines 13 types of diagrams

divided into 3 categories:

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Use Case Diagrams

Communication
Use
Use case
case

Actor

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Activity Diagram Symbols

Name
Activity

Flow

Symbol

Meaning
Indicates events

Shows the sequence of events

Document

Represents documents and reports

Flow

Represents the flow of information

between events

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Activity Diagram Symbols

(cont.)
Name

Symbol

Start/End
Start

End

Branch
Guard
Expression

Fork/Join

Meaning
Indicates the start or the end
of the activity
Represents branching situations

Text

Labels the transitions coming

out of a branch
Indicates the fork and the subsequent
join of the threads coming out of fork

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Activity Diagram Swimlanes

Name

Name

Name

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Business Process Diagrams

The Business Process Diagram (BPD) is a
graphical representation of a business process.

Business Process Modeling Notation (BPMN)

is the most widely-accepted standard for
modeling business processes in the form of BPDs.

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BPMN Symbols
Name

Symbol

Meaning

Task

Represents tasks or activities

Sequence
flow

Shows the order that activities

will be performed in a Process
Represents decisions
that affect the flow

Gateway
Event

Start Intermediate End

Represents something that happens

during the course of a business process

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Pool

Name

Lane

Name
Name Name

BPMN Swimlanes

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BPMN Additional Symbols

Name

Symbol

Meaning

Annotation

Allows modeler to provide additional

information to the reader of BPD

Message
flow

Shows the flow of messages between

two separate process participants

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Narrative Techniques
Narrative techniques are useful in the
fact-finding stage of system analysis.
What are some examples of narrative techniques?
Open-ended and closed-ended questionnaires

Document reviews
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Resource Utilization Analysis

Work measurement involves four basic steps.
1. Identify the tasks.
2. Obtain time estimates for performing the tasks.
3. Adjust these time estimates.

4. Analyze requirements based on these data.

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Resource Utilization Analysis

(Average time/unit + Idle time/unit)

Average volume = Total task time

Total time available Total task time

= Capacity utilization
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Decision Analysis Techniques

Decision to be made
Conditions that can occur

Path to be followed for each condition

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Branching Table Format

Code
equal to

Go to

Inconnector Inconnector
reference
reference

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Decision Table Format

Table Title

Condition stub
If:
Then: Action stub

Rules
1
2
3
Condition entry

Action entry

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Decision Table for

Processing Labor Distribution

If

Then

Line
1
2
3
10
11
12
13
14

Condition action Rule

15 Regular hours
15 Overtime hours
15 Shift bonus hours

1
Y
Y
Y

N
Y

5
N
Y
Y

N
Y

Regular dollars

Overtime dollars

Shift dollars

Error no shift or OT

Nest record

Go to F (Function); R (Rule, same table); T (Table)

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Software for Systems

Techniques

Legibility
Enhanced formatting
and presentation capabilities

Enhanced capabilities to revise

and reproduce documentation
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Software for Systems

Techniques

Microsoft Office Applications

Computer-Aided Software Engineering (CASE)

UML Modeling Tools

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End of Chapter
2

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