Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

Chapter 5
DOCUMENTING ACCOUNTING INFORMATION SYSTEMS

Discussion Questions
5-1. The chapter provides ten reasons why documenting AISs is important: (1) depicting
how the system works, (2) training users, (3) designing new systems, (4) controlling systems
development costs, (5) standardizing communication with others, (6) auditing, and (7)
documenting business processes, (8) complying with the Sarbanes Oxley Act, (9) establishing
accountability for work, and (10) saving money. Additional reasons include: (1) to help evaluate
the performance of system personnel, (2) to help evaluate the adequacy or efficiency of an
existing system, and (3) to provide design specifications to outside vendors who might be
proposing new systems.

Accountants are interested in system documentation for all these reasons. For example,
inadequate documentation makes it difficult to use an integrated accounting package effectively,
design one for others to use, or audit a system intelligently. Flowcharts and similar systems
documentation are also important to auditors. These charts can help auditors spot internal
control weaknesses that are not apparent from prototypes or not obvious when observing a
system in use.

5-2. Document flowcharts mostly depict the physical flow of paper documents through a
system. Document and system flowcharts are similar in that they use similar symbols, although
document flowcharts use a few additional symbols, such as envelopes and hand trucks to depict
movement of goods. System flowcharts contain more detail about processing logic.

Accountants can use data flow diagrams (DFDs) to depict the physical flows of data through an
AIS (like document flowcharts), or the logical flow of data through an AIS (like system
flowcharts). Like document or system flowcharts, their main objective is to document data flows
in an orderly, graphic, and easily-understood format. But DFDs use fewer symbols than either
document or system flowcharts, and do not require columns (like document flowcharts).

Program flowcharts tend to depict the most detailed level of system flowcharts because they
outline the logic sequence for a particular application program. Thus, they are more used by
programmers and system analysts than by accountants and auditors. Still, auditors will need to
understand these program flowcharts when looking at program logic and program controls.
Program flowcharts use many of the same symbols found in system flowcharts, but also use
some special ones such as the decision symbol.

5-3. A document flowchart is a pictorial representation of the physical data flow through
the various departments of a business. A document flowchart is used in designing or evaluating
an accounting information system.

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 Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

1. A systems analyst uses it when evaluating a system to see if each department is receiving
the necessary data and that unnecessary data are not collected, stored, or forwarded to
others.
2. A system designer uses it when managers wish to improve or replace an existing system.
3. A computer programmer can use a document flowchart as a blueprint for creating
computer programs that will replace a formerly manual system.
4. An auditor uses it to help define, follow, and evaluate an audit trail.
5. An internal data security expert uses it to identify weaknesses in the internal controls or
data processing of an accounting system.

5-4. Guidelines for creating data flow diagrams, document flowcharts, system flowcharts,
process maps, decision tables, and decision trees may be found in the text.

5-5. Data flow diagrams use a square symbol to show the source or destination of data, a
circle to indicate a process, an open rectangle symbol to indicate a store of data, and arrows to
depict a data flow or data stream.

5-6. Developers create data flow diagrams in a hierarchy called the top-down approach to
systems development. In this approach, developers create these diagrams in levels, beginning
with the highest, least-detailed level, and exploding or drilling downward with increasing
refinements of each piece of the preceding level until they specify the complete system. The
rationale behind this approach is to keep major system objectives in view at first, and to worry
about details later as major system components become clear. The process is reiterative,
revisions are common, and little is considered “final” until the lowest diagram levels have been
specified and approved.

The broadest DFD is called a context diagram. The next level (a “level-0" diagram) is also
called a physical data flow diagram. Lower levels are numbered “level-1", “level-2", and so
forth, and are commonly termed logical data flow diagrams.

5-7. It is usually easier to follow logic with a chart or figure than with a written narrative.
For example, when reading a long narrative description of a process, it is often difficult to
visualize relationships between system elements and a reader’s attention can wander. In contrast,
graphical depictions of the same logic are usually easier to understand because most people grasp
the use of arrows to show connections or data flows.

5-8. Decision tables outline the set of conditions that a given processing task might
encounter and indicate the appropriate action to take for each condition. Decision tables can
therefore help system designers plan data processing functions, develop computer programs, and
create written records of the processing logic for later reference. The major advantage of
decision tables is that they can summarize a potentially large number of conditions and actions in
a compact format. They are therefore also useful for identifying lapses in controls—for example,
because a computer program fails to account for a specific set of conditions. Finally, those
accountants who audit AISs rely heavily upon internal documentation, and decision tables can
help them verify the processing logic and control procedures that were built into these systems.

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 Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

5-9. Just as word processors enable users to create, store, modify, and print word
documents, CASE tools enable IT and accounting personnel to create, store, modify, and print
system documentation. The term CASE is an acronym for "computer assisted software
engineering." CASE tools automate the development of program and system documentation.
Thus, developers use them to create data flow diagrams, entity relationship diagrams, record
layouts, data entry screens, report formats, screen menus, system flowcharts, and program
flowcharts. Most also include generators for developing data dictionaries.

CASE tools are computer programs that typically run on microcomputers. The user selects a
particular type of document to develop or modify, and then works on it in much the same way
that a manager uses a word processor to work on a word document. It is not necessary to use
CASE programs to develop AIS documentation, but it is difficult to imagine why anyone would
not use such capable and time-saving tools.

5-10. End user computing refers to the computer activities of non-computer employees,
especially the development of large spreadsheets and databases. Although such activities are
commonplace today, they also create problems. For example, when non-IT personnel develop
important spreadsheet models, a company becomes increasingly dependent upon such
individuals to answer questions or to explain how to use the software. Documentation is also
important in end-user computing environments because it provides the training aids, user
descriptions, tutorials, and reference materials that other users need in order to run the
applications effectively. At one company known to the authors, important spreadsheets must be
approved by three separate supervisors to guarantee their accuracy and completeness.

Problems
5-11. This problem asks students to familiarize themselves with Excel’s flowcharting
symbols. The list includes the following symbols:

Process Alternate Process Decision Data

Predefined Process Internal Storage Document Multidocument

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 Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

Terminator Preparation Manual Input Manual Operation

Connector Off-page Connector Card Punched Tape

Summing Junction Or Collate Sort

Extract Merge Stored Data Delay

Sequential Access Magnetic Disk Direct Access Display

Storage Storage

5-12. Draw a document flowchart for each of the following situations.

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Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

Sales 1
Prepare
Invoice
Sales
Draft

Credit
Sales
File
Invoices

Transactions
Batch
Control
Tape

Employee CPU using

Application “Create New Employee
Forms Terminal Records” Master
program File

Customer
Inquiry Letters
(4 types)

List of
Review uncollectable
Customer accounts
Accounts

Inspect
shipments

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 Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

g)
Employee
time card
data Employee to CPU
Key entry time card
data

h)
Employee
time card
data Key entry to CPU

Employee
time card data
on floppy disk

i) The flowcharter should use onpage connectors.

Dept. 1 Dept. 2 Dept. 3 Dept. 4

j)

Source Source Source Source

Document Document Document Document

File

k) Dept. 2
Dept. 1

Source Source
Document Document

Copy File

Ledger

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 Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

5-13. Mark Goodwin Convenience Stores

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 Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

5-14 Garcia-Lanoue Company

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 Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

5-15. Ron Mitchell Manufacturing Company

Data Entry Computer

Shipping Department
Department Operations

Shipping Shipping
order order
File

Key entry

Floppy
disk

Verify

Floppy Floppy
disk disk

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 Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

5-16. Amanda M Company

Context Diagram:

Sales / Employees
Customers Collection & Bank
Process

Level 0 Diagram:

Customers

Sales
Orders Payments
Shipping
Notice and
Invoice

1.0 Order Shipment 3.0

Data 2.0 Data
Process Process
Process
Sales Electronic
Shipments
Orders Payments

Sales
Reports
Order Payment
Reports Reports

Employees
& Bank

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 Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

5-17. Winston Beauchamp Company

System Flowchart:

Product
file

Manual Process
customer Key entry customer
order orders

Customer
order file

Customer
orders report

Data Flow Diagram:

Customer Product
Customer
orders file

product
information

Key
customer Customer
order order Customer
data information
order file

four copies of
one copy of customer order
customer order

Hold
for further
processing
Other
departments

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 Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

5-18. LeVitre and Sweezy Credit Union

Customers Employers

Make Make Make

Deposit Withdrawal Deposit

Accounting
Transactions

Get
Create Update
Information
Monthly Master File
For
Statements Daily
Inquiries

Bank
Employees

Credit Union Prepare

Accounts Payroll
Master File Checks

Pay
Bills

Creditors
For
Rent,Phone,
Utilities, Etc.

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 Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

5-19. Jeffrey Getelman Publishing Company

New subscription Change of

orders, renewals, address
and checks forms

Terminal Terminal

CPU CPU

using “Edit Subscriber using “Change

Subscription Master of Address“
Orders“ Program File Program

Summary Report Summary Report

of new of address
subscription changes
renewals

CPU

using “Monthly
Mailing Label”
Program

Notices to
new and renewal
Mailing
subscribers
Labels

to production
department to mail

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 Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

5-20. The Bridget Joyce Company

a. The decision table is shown below. Note that alternate decision rules would also be
reasonable here since the case does not specify exactly what action is to be taken for each set of
conditions.

DECISION TABLE

RULES
Account Status: 1 2 3 4 5 6 7 8 9 10 11
Not past due Y
Less than 30 days past due Y
31-60 days past due Y Y Y
61-90 days past due Y Y Y
More than 90 days past due Y Y Y
Account Activity:
No activity Y Y Y Y Y
Written communications Y Y Y
Partial payment Y Y Y
Action:
Do nothing √ √ √ √ √ √ √
Send first letter of inquiry √
Send second letter of inquiry √ √
Refer to collection agency √

b. This exercise requires some creativity on the part of the student. One possibility is to
give each customer a rating on the following:

Rating Because
A no prior delinquency history
B only one prior delinquency
C only two prior delinquencies
D more than two prior delinquencies

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 Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

Mr. Smith can now make a decision based upon this categorization of customer account
history. We point out that many companies handle delinquencies on an individual basis.
Most small companies, for example, will try to work with their customers whenever possible
instead of writing to them impersonally because written confrontations rarely produce
desired results.

5-21. This problem requires students to draw the flowcharts in Figure 5-20. In a later part
of the problem, students must recreate the flowcharts in Figures 5-3, 5-6, 5-8, 5-11, 5-12, 5-13,
5-14, and 5-15. Because these flowcharts are already shown in the text, the outputs are already
known.

Teaching notes: Students should follow the directions provided in this case to create the two
(program) flowcharts shown as well as the link that connects the two flowcharts together.
Students can document their links by printing a copy of their formulas. Finally, although using
Excel’s drawing tools is straightforward, it still takes time to create even small diagrams with
them. Thus, we recommend that instructors do not assign all parts of this case (a through h), but
only assign a selection of these diagrams.

5-22. This problem asks students to visit the ConceptDraw products website at:
http://mapthink.blogspot.com/2012/10/how-flowcharts-help-companies-save.html and read the
blog. According to the website, the primary advantage of flowcharts is to enable companies to
communicate with their auditors, thus saving these auditors time and, indirectly, saving money
that companies might otherwise have to pay their auditors. But flowcharts save money in many
other ways, as suggested by the “ten reasons why documentation is important” section located at
the start of the chapter.

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