Chapter Three—Documentation: What is documentation? The narratives, flowcharts, diagrams, and other written materials that explain how a system works. Why document processes? It is an essential part of running an accounting department. Knowledge that is only “in someone’s head” is very risky. People can leave very suddenly. This understanding can be gleaned through documenting the internal control system—a process that effectively exposes the strengths and weaknesses of a system.. Sarbanes Oxley Act effectively requires that publicly-traded corporations and their auditors document and test the company’s internal controls. In this chapter, we discuss two of the most common documentation tools: Data flow diagrams--Graphical descriptions of the sources and destinations of data. DFDs show where data comes from, how it flows, the processes performed on it, and where it goes. 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. Message: you should know how to read and prepare a flow chart. Accountants are expected to have this skill. 1) Data Flow Diagrams: describe the flow of information within an organization. They are used to document existing systems, and plan and design new systems. DFDs have only four symbols (in general, they are less detailed than a flowchart). Data stores: Data flows: SHAPE \* MERGEFORMAT And these are the only four symbols used. Good for higher level description of a system, but they are not detailed. DFDs: The highest level DFD is known as a context diagram. This is a summary level view of the system. DFDs are often accompanied by narratives, again to provide more detail. Guidelines for creating DFDs: 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. 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. 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. 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. 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, date prepared, and preparer’s name. 2) Document flowcharts: Provide physical substance. Flowcharting symbols can be divided into: INPUT/OUTPUT SYMBOLS Document symbol represents a document or report that is prepared by hand or printed by a computer. Multiple Copies of One Document--The document copies should be numbered in the upper, right-hand corner. Input/Output; Journal/Ledger symbol can represent any input or output on a program flowchart. Also represents accounting journals or ledgers in a document flowchart. Display symbol represents information displayed by an online output device such as a terminal, monitor, or screen. Online Keying symbol represents data entry by an online device such as a terminal or personal computer. Terminal or Personal Computer symbol combines the display and online keying symbols to represent terminals and personal computers. Transmittal Tape symbol represents manually prepared control totals which are to be compared to computer totals for control purposes. PROCESSING SYMBOLS Computer Processing symbol represents a process performed by a computer, which usually results in a change in data or information. Manual Operation symbol represents a processing operation that is performed manually. Auxiliary Operation represents a processing operation carried out by a device other than a computer, e.g., an optical character scanner. Off-line Keying Operation symbol represents an operation that uses an off-line keying device, such as a cash register or keying to a disk. STORAGE SYMBOLS Magnetic disk symbol represents data stored permanently on a magnetic disk. Frequently used to represent master files and databases. Magnetic Tape symbol represents data stored on a magnetic tape. Sometimes represents transaction files. Diskette symbol represents data stored on a floppy disk or zip disk. Online Storage symbol represents data stored in a temporary online file on a direct-access medium such as a magnetic disk. File symbol represents a file of documents that are manually stored and retrieved. Letter indicates the ordering sequence: A = alphabetic order; D = date order; N = numeric order. FLOW AND MISCELLANEOUS SYMBOLS Document or Processing Flow symbol represents the direction of processing or document flow. Normal flow is top to bottom and left to right. Data/Information Flow symbol represents the direction of data/information flow. Often used to show data being copied from one document to another. Communication Link symbol represents the transmission of data from one location to another via communication lines. On-page connector symbol connects processing from one location to another on the same page. Used to avoid crisscrossing lines. Off-page connector symbol connects the processing flow between two different pages. Signals the exit from one page and the corresponding entrance on another page. Terminal symbol represents the beginning, end, or a point of interruption in a process or program. Also used to indicate an external party. Decision symbol represents a decision-making step. Used in a program flowchart to show branching to alternate paths. Annotation symbol provides for the addition of descriptive comments or explanatory notes as clarification. Document Flow Charts 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; and walk through systems transactions. Identify entities to be flowcharted, e.g., departments, functions, external parties, documents or information flows, and processes. As you read through a narrative, mark the preceding items with different shapes (e.g., drawing a rectangle around entities, circling documents, etc.). Use separate columns for the activity of each entity. Flowchart the normal course of operations, and identify exceptions with annotations. As much as possible, draw the flow 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. 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; and what was (were) the output(s). The flow sequence should be input -- process – output. 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 or filing a document Do not connect two documents except when forwarding to another column. When a document is forwarded, show it in both locations. When using multiple copies of a document, place document numbers in the upper, right-hand corner. Document Flow Charts Show on-page connectors and label them clearly to avoid excess flow lines. Use off-page connectors if the flow goes to another page. 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 3) Systems Flowcharts: These are very similar to flowcharts. “Systems flowcharts depict the relationship among the input, processing, and output of an AIS.” “Systems flowcharts are an important systems analysis, design and evaluation tool.” They are an excellent vehicle for describing flows and procedures within AIS. 4) Program Flowcharts: A program flowchart illustrates the sequence of logical operations performed by a computer in executing a program. Class Problem – Z Co. uses a manual accounting system. Customer payments are received by a clerk in the Cashier’s office who opens the mail, restrictively endorses the checks, separates the checks from the remittance advices, prepares an adding machine tape (2 copies) totaling the remittances, and prepares a deposit slip (2 copies). Copy 1 of the deposit ticket and the checks are sent to the bank. Copy 2 of the deposit ticket is matched and stapled to copy 1 of the adding machine tape and filed by date in the Cashier’s office. Copy 2 of the adding machine tape is sent to the General Ledger department. The remittance advices are forwarded to clerks in the accounts receivable department who post them to the accounts receivable subsidiary ledger, and then file them by customer number in the accounts receivable department. PREPARE A DOCUMENT FLOWCHART IN GOOD FORM.