SYSTEMS

DEVELOPMENT AND
DOCUMENTATION
TECHNIQUES
INTRODUCTION
• Documentation includes the following types
of tools:
• Narratives (written descriptions)
• Flowcharts
• Diagrams
• Other written material
INTRODUCTION
• Documentation covers the who, what,
when, where, why, and how of:
• Data entry
• Processing
• Storage
• Information output
• System controls
INTRODUCTION
• How do accountants use documentation?
• At a minimum, they have to read documentation to
understand how a system works.
• 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
INTRODUCTION
• Two of the most common documentation tools:
• Data flow diagrams

• Graphical descriptions of the

sources and destinations of data.
They show:
– Where data comes from
– How it flows
– The processes performed on it
– Where it goes
INTRODUCTION
• Two of the most common documentation tools:
• Data flow diagrams
• Flowcharts

• Include three types:

– Document flowcharts describe the flow of documents
and information between departments or units.
– System flowcharts describe the relationship between
inputs, processing, and outputs for a system.
– Program flowcharts describe the sequence of logical
operations performed in a computer program.
INTRODUCTION
• Documentation techniques are necessary tools for
accountants:
• SAS-94 requires 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.
• SOX (2002) effectively requires that publicly-traded
corporations and their auditors document and test the
company’s internal controls.
• Auditing Standard No. 2 promulgated by the PCAOB
requires that the external auditor express an opinion on the
client’s system of internal controls.
INTRODUCTION
• Documentation tools help accountants by:
• Organizing very complicated systems into a form that
can be more readily understood
• Helping new team members understand a pre-existing
system
INTRODUCTION
• Which method should you use—flowcharts or
DFDs?
• 62.5% of IS professionals use DFDs.
• 97.6% use flowcharts.
• Both can be prepared relatively simply using available
software.
• Both are tested on professional exams.
• CONCLUSION: You need to know them both.
DATA FLOW DIAGRAMS
• A data flow diagram (DFD) graphically describes
the flow of data within an organization. It is used
to:
• Document existing systems
• Plan and design new systems
• There is no black-and-white approach to
developing a DFD.
 DATA FLOW DIAGRAMS
• Example of a data flow
diagram of the customer
payment process from
Figure 3-3 in your
textbook

Customer Remittance Receivables

payment 1.0 2.0
data Information Credit
Customer Process Update
Payment A/R Manager

Deposit

Bank
DATA FLOW DIAGRAMS
• A data flow diagram consists of four basic
elements:
• Data sources and destinations
• Data flows
• Transformation processes
• Data stores
DATA FLOW DIAGRAMS
• A data flow diagram consists of four basic
elements:
• Data sources and destinations
• Data flows
• Transformation processes
• Data stores
DATA FLOW DIAGRAMS
• Data sources and destinations
• Appear as squares
• Represent organizations or individuals that send or
receive data used or produced by the system
• An item can be both a source and a destination
 DATA FLOW DIAGRAMS
• Data sources and
destinations are marked
in red.
• Can you tell which are
sources and which are
destinations?

Customer Remittance Receivables

payment 1.0 2.0
data Information Credit
Customer Process Update
Payment A/R Manager

Deposit

Bank
DATA FLOW DIAGRAMS
• A data flow diagram consists of four basic
elements:
• Data sources and destinations
• Data flows
• Transformation processes
• Data stores
DATA FLOW DIAGRAMS
• Data flows
• Appear as arrows
• Represent the flow of data between sources and
destinations, processes, and data stores
 DATA FLOW DIAGRAMS
• Data flows are shown in red.
• Does it appear that a data
flow can be two-way?
• If so, how is it handled?

Customer Remittance Receivables

payment 1.0 2.0
data Information Credit
Customer Process Update
Payment A/R Manager

Deposit

Bank
 DATA FLOW DIAGRAMS
• Data flows should always be
labeled.
• The exception is a data flow
moving into or out of a data
store.
• What symbol is the data store?

Customer Remittance Receivables

payment 1.0 2.0
data Information Credit
Customer Process Update
Payment A/R Manager

Deposit

Bank
DATA FLOW DIAGRAMS
• As you probably surmised from the previous
slides, if a data flow is two-way, use a bi-
directional arrow.

Update
Receiv-
ables
DATA FLOW DIAGRAMS
• If two data elements flow together, then the use
of one data flow line is appropriate.

Cash Rec’t & Remittance Slip Process

Customer
Payment
DATA FLOW DIAGRAMS
• If the data elements do not always flow together, then
multiple lines will be needed.

Customer Inquiry Process

Customer Payment
Customer Payment
DATA FLOW DIAGRAMS
• A data flow diagram consists of four basic
elements:
• Data sources and destinations
• Data flows
• Transformation processes
• Data stores
DATA FLOW DIAGRAMS
• Processes
• Appear as circles
• Represent the transformation of data
 DATA FLOW DIAGRAMS
• The transformation processes are
shown in red.
• Every process must have at least
one data inflow and at least one
data outflow. Why?
• What do you notice about how the
processes are labeled?

Customer Remittance Receivables

payment 1.0 2.0
data Information Credit
Customer Process Update
Payment A/R Manager

Deposit

Bank
DATA FLOW DIAGRAMS
• Data stores
• Appear as two horizontal lines
• Represent a temporary or permanent repository of data
 DATA FLOW DIAGRAMS
• The data store is shown in red.
• Notice that the inflows and
outflows to the data store are Accounts
not labeled. Receivable

Customer Remittance Receivables

payment 1.0 2.0
data Information Credit
Customer Process Update
Payment A/R Manager

Deposit

Bank
DATA FLOW DIAGRAMS
• Data dictionary:
• Data flows and data stores are typically collections of
data elements.
• EXAMPLE: A data flow labeled student information
might contain elements such as student name, date of
birth, ID number, address, phone number, and major.
• The data dictionary contains a description of all data
elements, data stores, and data flows in a system.
DATA FLOW DIAGRAMS
• Subdividing the DFD:
• Few systems can be fully diagrammed on one sheet of
paper, and users have needs for differing levels of
detail.
• Consequently, DFDs are subdivided into successively
lower levels to provide increasing amounts of detail.
DATA FLOW DIAGRAMS
• The highest level of DFD is called a context
diagram.
• It provides a summary-level view of the system.
• It depicts a data processing system and the external
entities that are:
• Sources of its input
• Destinations of its output
DATA FLOW DIAGRAMS
Govt.
t
Depart- en Agencies
ym
ments Tim pa
ec t&
ard por
s r e
x
Ta

Payroll Employee checks

Employees
Processing
m System
e for Pa y
roll
o ye che
m pl
f orm ck
e e
ew a ng Pa
N h
e ec yr
o Bank
Human y ll
m plo re
E po
Resources rt

• This is the context diagram for the

Manage-
S&S payroll processing system
ment
(Figure 3-5 in your textbook).
DATA FLOW DIAGRAMS
Govt.
t
Depart- en Agencies
ym
ments Tim pa
ec t&
ard por
s r e
x
Ta

Payroll Employee checks

Employees
Processing
m System
e for Pa y
roll
o ye che
m pl
f orm ck
e e
ew a ng Pa
N h
e ec yr
o Bank
Human y ll
m plo re
E po
Resources rt

• What information comes into this Manage-

process, and from where? ment
DATA FLOW DIAGRAMS
Govt.
t
Depart- m en Agencies
ments p ay
Tim &
ec t
ard por
s x re
Ta

Payroll Employee checks

Employees
Processing
o rm
System Pa y
e f roll
ye che
plo orm ck
em g ef
Ne
w han Pa
ec yr Bank
Human l oye ol
lr
p ep
Em
Resources or
t

• What information is produced by this Manage-

process, and where does it go? ment
 DATA FLOW DIAGRAMS
Depart-
ments Employees
Employee
New employee Time paychecks
Human form cards
Resources
1.0
Update 2.0
Employee Payroll
empl. Pay
Change check
Payroll Employ- Bank
form
file ees

Payroll
Disburse-
3.0 5.0
ment data
This diagram Prepare Update
reports Gen.
shows the Ledger
next level of Payroll tax
disb. voucher
detail for the Payroll
report
context 4.0
diagram in Pay
Tax report
Manage- taxes
Figure 3-5. ment
& payment
Govt.
Agencies
 DATA FLOW DIAGRAMS
Depart-
ments Employees
Employee
New employee Time paychecks
Human form cards
Resources
1.0
Update 2.0
Employee Pay Payroll
empl.
Change Employ- check
Payroll Bank
form ees
file

Payroll
Disburse-
3.0 ment data 5.0
What Prepare Update
reports Gen.
information Ledger
comes into Payroll tax
disb. voucher
these Payroll
report
processes 4.0
and from Pay
Tax report
Manage- taxes
where? ment
& payment
Govt.
Agencies
 DATA FLOW DIAGRAMS
Depart-
ments Employees
Employee
New employee Time paychecks
Human form cards
Resources
1.0
Update 2.0
Employee Payroll
empl. Pay
Change check
Payroll Employ- Bank
form
file ees

Payroll
Disburse-
3.0 5.0
ment data
What Prepare Update
reports Gen.
information is Ledger
produced by Payroll tax
disb. voucher
these Payroll
report
processes, 4.0
and where Pay
Tax report
Manage- taxes
does it go? ment
& payment
Govt.
Agencies
 DATA FLOW DIAGRAMS
Depart-
ments Employees
Employee
New employee Time paychecks
Human form cards
Resources
1.0
Update 2.0
Employee Payroll
empl. Pay
Change check
Payroll Employ- Bank
form
file ees

Payroll
Disburse-
3.0 5.0
ment data
How do the Prepare Update
reports Gen.
sources and Ledger
destinations Payroll tax
disb. voucher
differ from Payroll
report
the context 4.0
diagram? Pay
Tax report
Manage- taxes
& payment
ment Govt.
Agencies
 DATA FLOW DIAGRAMS
Depart-
ments Employees
Employee
New employee Time paychecks
Human form cards
Resources
1.0
Employee
Update 2.0 Payroll
empl. Pay
Change check
Payroll Employ- Bank
form
file ees
Payroll
Disburse-
3.0 ment data 5.0
Notice that Prepare Update
reports
each process Gen.
Ledger
in the DFD is Payroll tax
disb. voucher
numbered Payroll
report
sequentially. 4.0
Pay
taxes Tax report
Manage- & payment
ment Govt.
Agencies
 DATA FLOW DIAGRAMS
Depart-
ments Employees
Employee
New employee Time paychecks
Human form cards
Resources
1.0
Update 2.0
Employee Pay Payroll
empl.
Change check
form
Payroll Employ- Bank
file ees
Suppose we Payroll
exploded Process 3.0
Disburse-
ment data 5.0
2.0 (pay Prepare Update
employees) in the reports Gen.
next level. The Ledger
Payroll tax
sub-processes disb. voucher
Payroll
would be report
numbered 2.1, 2.2, 4.0
Pay
2.3, etc. Tax report
Manage- taxes
& payment
ment Govt.
Agencies
DATA FLOW DIAGRAMS
• We’re going to go into a partial example of how
the first level of detail was created.
• But before we do, let’s step through some
guidelines on how to create a DFD.
DATA FLOW DIAGRAMS
• RULE 1: Understand the system. Observe the
flow of information and interview people involved
to gain that understanding.
• RULE 2: Ignore control processes and control
actions (e.g., error corrections). Only very critical
error paths should be included.
• RULE 3: Determine the system boundaries—
where it starts and stops. If you’re not sure about
a process, include it for the time being.
DATA FLOW DIAGRAMS
• RULE 4: Draw the context diagram first, and then
draw successively greater levels of detail.
• RULE 5: Identify and label all data flows. The
only ones that do not have to be labeled are
those that go into or come out of data stores.
• RULE 6: Data flows that always flow together
should be grouped together. Those that do not
flow together should be shown on separate lines.
DATA FLOW DIAGRAMS
• RULE 7: Show a process (circle) wherever a data flow is
converted from one form to another. Likewise, every
process should have at least one incoming data flow and
at least one outgoing data flow.
• RULE 8: Transformation processes that are logically
related or occur simultaneously can be grouped in one
bubble.
• RULE 9: Number each process sequentially. A process
labeled 5.0 would be exploded at the next level into
processes numbered 5.1, 5.2, etc. A process labeled 5.2
would be exploded into 5.21, 5.22, etc.
DATA FLOW DIAGRAMS
• RULE 10: Process names should include action
verbs, such as update, prepare, etc.
• RULE 11: Identify and label all data stores,
whether temporary or permanent.
• RULE 12: Identify and label all sources and
destinations. An entity can be both a source and
destination. You may wish to include such items
twice on the diagram, if needed, to avoid
excessive or crossing lines.
DATA FLOW DIAGRAMS
• RULE 13: As much as possible, organize the
flow from top to bottom and left to right.
• RULE 14: You’re not likely to get it beautiful the
first time, so plan to go through several iterations
of refinements.
• RULE 15: On the final copy, lines should not
cross. On each page, include:
• The name of the DFD
• The date prepared
• The preparer’s name
DATA FLOW DIAGRAMS
• Keep the following in mind as you develop your
DFD:
• Remember to ignore control activities, such as error
correction processes.
• Some data inputs and outputs will not appear on the
first level of the DFD but appear as the processes are
exploded into greater levels of detail.
DATA FLOW DIAGRAMS
• The data flow diagram focuses on the logical flow
of data.
• Next, we will discuss flowcharts, which place
greater emphasis on physical details.
FLOWCHARTS
• A flowchart is an analytical technique that
describes some aspect of an information system
in a clear, concise, and logical manner.
• Flowcharts use a set of standard symbols to
depict processing procedures and the flow of
data.
FLOWCHARTS
• Every shape on a flowchart depicts a unique
operation, input, processing activity, or storage
medium.
• In the days of yore, flowcharts were commonly
drawn with templates.
• Now, it is more common to use a software
program such as LucidChart.
• Microsoft and Power Point are also used
• The software uses pre-drawn shapes, and the
developer drags the shapes into the drawing.
FLOWCHARTS
• There are four types of flowcharting symbols:
• Input/output symbols

Input/output symbols indicate the

type of device or media that provides
input to or records output from a
process.
FLOWCHARTS
• There are four types of flowcharting symbols:
• Input/output symbols
• Processing symbols

Processing symbols indicate the type

of device used to process the data or
whether the data is processed
manually.
FLOWCHARTS
• There are four types of flowcharting symbols:
• Input/output symbols
• Processing symbols
• Storage symbols

Storage symbols indicate the type of

device used to store data while the
system is not using it.
FLOWCHARTS
• There are four types of flowcharting symbols:
• Input/output symbols
• Processing symbols
• Storage symbols
• Flow and miscellaneous symbols

• Flow and miscellaneous symbols may

indicate:
– The flow of data and goods
– The beginning or end of the flowchart
– The location of a decision
– An explanatory note
FLOWCHARTS
• Click on buttons below if you wish to review symbols in
the various categories.

Input/Output Processing
Symbols Symbols

Storage Flow & Misc.

Symbols Symbols
DOCUMENT FLOWCHARTS
• 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
DOCUMENT FLOWCHARTS
• 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 inefficiences such
as:
• Inadequate communication flows
• Unnecessarily complex document flows
• Procedures that cause wasteful delays

• Document flowcharts are also prepared in the

system design process.
This is part of the
document flowchart
from Figure 3-9 in
your textbook.
GUIDELINES FOR PREPARING
FLOWCHARTS
• Let’s step through some guidelines for preparing
flowcharts:
• 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
GUIDELINES FOR PREPARING
FLOWCHARTS
• Identify:

• Entities to be flowcharted, e.g., departments,

functions, external parties (the parties who “do”
things in the story)
• Documents or information flows
• Processes
• As you read through a narrative, you may
want to mark the preceding items with
different shapes (e.g., drawing a rectangle
around entities, circling documents, etc.).
GUIDELINES FOR PREPARING
FLOWCHARTS
• 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.
What are the entities
in this flowchart?
GUIDELINES FOR PREPARING
FLOWCHARTS
• Flowchart the normal course of operations, and identify
exceptions with annotations.
• As much as possible, the flow should go from top to
bottom and left to right.
• Use standard flowcharting symbols, and draw with a
template or computer.
• Clearly label all symbols. Use annotations if necessary
to provide adequate explanation.
GUIDELINES FOR PREPARING
FLOWCHARTS
• Give the flowchart a clear beginning and ending.
• Show where each document originated and its final disposition.
• 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 next slide that the flow sequence is input --
process – output.
Identifies where input is coming from
Inputs
Process
Output to
storage
Input for
next
process
Process
Output
GUIDELINES FOR PREPARING
FLOWCHARTS
• Every manual process should have at least one
input and at least one output.
• Show all data entered into or retrieved from a
computer file as passing through a process first.
• Do not show process symbols for:
• Forwarding a document to another entity
• Filing a document
Forwarding
a document
 Filing
a document
GUIDELINES FOR PREPARING
FLOWCHARTS
• Do not connect two documents except
when forwarding to another column.
• When a document is forwarded, show it in
both locations.
Show forwarded
document in both
locations
GUIDELINES FOR PREPARING
FLOWCHARTS
• When using multiple copies of a
document, place document numbers in
the upper, right-hand corner.
What happens to the
document numbers
as the documents
move to other
locations?
GUIDELINES FOR PREPARING
FLOWCHARTS
• Show on-page connectors and label them
clearly to avoid excess flow lines.
GUIDELINES FOR PREPARING
FLOWCHARTS
• Use off-page connectors if the flow goes
to another page.
Are there other off-
page connectors on
this flowchart?
GUIDELINES FOR PREPARING
FLOWCHARTS
• If a flowchart takes more than one page, label the
pages as 1 of 5, 2 of 5, 3 of 5, etc.
• Show documents or reports first in the column where
they are created.
• Start with a rough draft; then redesign to avoid clutter
and crossed lines.
• Verify the accuracy of your flowchart by reviewing it with
users, etc.
• Place the flowchart name, the date, and the preparer’s
name on each page of the final copy.
SYSTEM FLOWCHARTS
• Now that we’ve looked at document flowcharts
and guidelines for creating flowcharts, let’s take a
brief look at system flowcharts.
SYSTEM FLOWCHARTS
• A system flowchart depicts the relationship among the
inputs, processes, and outputs of an AIS.
• The system flowchart begins by identifying the inputs to the
system.

• These inputs can be:

– New data
– Data stored for future use
– Both
SYSTEM FLOWCHARTS
• A system flowchart depicts the relationship among the
inputs, processes, and outputs of an AIS.
• The system flowchart begins by identifying the inputs to the
system.
• Each input is followed by a process, i.e., the steps performed
on the data.

• If the process is performed by a

computer, the logic of the computer
program would be depicted in a program
flowchart.
SYSTEM FLOWCHARTS
• A system flowchart depicts the relationship among the
inputs, processes, and outputs of an AIS.
• The system flowchart begins by identifying the inputs to the
system.
• Each input is followed by a process, i.e., the steps performed on
the data.
• The process is followed by outputs—the resulting new
information. • The output may be:
– Stored for later use
– Displayed on a screen
– Printed on paper
– An input to the next process
SYSTEM FLOWCHARTS
• A system flowchart depicts the relationship
among the inputs, processes, and outputs of an
AIS.
• The system flowchart begins by identifying the inputs to
the system.
• Each input is followed by a process, i.e., the steps
performed on the data.
• The process is followed by outputs—the resulting new
information.
• In other words, it’s the same basic input – process –
output pattern that we saw in the document
flowchart.
• System Flowchart
• Can you spot the
input – process –
output pattern?
PROGRAM FLOWCHARTS
• Program flowcharts illustrate the sequence of logical
operations performed by a computer in executing a
program.
• They also follow an input – process – output pattern.
• The program flowchart from
Figure 3-11 in your textbook
is shown on the right.
• Note that the program flowchart
details the logic of processes
performed by the computer.
• This flowchart becomes the
programmer’s blueprint for writing
the actual computer program.
FLOWCHARTS VS. DFDs
• Now that we’ve examined both flowcharts and DFDs, it
may be useful to discuss the differences again.
• DFDs place a heavy emphasis on the logical aspects of a
system.
• Flowcharts place more emphasis on the physical
characteristics of the system.
• An example may be useful.
FLOWCHARTS VS. DFDs
• EXAMPLE: The registrar’s office of a small
college receives paper enrollment forms from
students. They sort these records alphabetically
and then update the student record file to show
the new classes. They also prepare class lists
from the same data. The sorted enrollment forms
are forwarded to the bursar’s office for billing
purposes. Class lists are mailed to faculty
members.
 Here’s a DFD
Students
that goes
with the
Enrollment
story.
Forms

1.0
Update Student
Student Records
Records

Enrollment
Forms

2.0
Prepare Bursar
Enrollment
Class Lists
Forms

Class
Lists

Faculty
 Registrar’s Office

Students Enrollment Sort

Students
Forms Forms

Enrollment
Forms

Update Sorted
1.0 A Enrollment
Student
Update Student Forms
Records
Student Records
Records

Enrollment Sorted
Forms Prepare
Enrollment Class
Forms Lists
2.0
Prepare
Enrollment
Bursar Here’s a
Class Lists
Forms flowchart Sorted
Class
Class
that goes Lists
Enrollment
Forms
Lists with the
story
Faculty
Faculty Bursar
FLOWCHARTS VS. DFDs
• Now let’s change the story so that students enter
enrollment data online. The registrar’s office sends a tape
file of the enrollment data to the bursar’s office and
continues to send paper class lists to faculty.
 Here’s the
Original
revised DFD.
DFD
Students Students How has it
changed?
Enrollment Enrollment
Forms Data

1.0 1.0
Update Student Update Student
Student Records Student Records
Records Records

Enrollment Enrollment
Forms Data

2.0 2.0
Prepare Bursar Prepare Bursar
Enrollment Enrollment
Class Lists Class Lists
Forms Data

Class Class
Lists Lists

Faculty Faculty
 Registrar’s Office Registrar’s Office

Enrollment Sort
Student Students Enrollment
Forms Forms
s Data

Update Sorted Update

A Enrollment Enrollment
Student Student
Forms Data
Records Records

Sorted Prepare
Enrollment Class Bursar
Prepare
Forms Lists Student Class
Records Lists

Sorted
Class
Lists
Enrollment Here’s the revised Class
Forms
flowchart. How has it Lists

Original changed?
Flowchart Faculty Bursar
Faculty
FLOWCHARTS VS. DFDs
• Moral of the Story: 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.
QUIZ QUESTION
• How is playing the piano like making DFDs and
flowcharts?
• You can’t learn to do it by just watching someone else.
• You can’t learn to do it by just looking at examples.
• Your first attempts are clumsy.
• Practice leads to improvement and maybe even perfection.
SUMMARY
• We’ve learned about graphical forms of
documentation, particularly:
• Data flow diagrams
• Flowcharts
• We’ve learned why these tools are important to
accountants and how they are employed.
• We’ve learned basic guidelines for creating data
flow diagrams and flowcharts.