Chapter 6

Documenting Accounting Information Systems

Discussion Questions
6-1.
The text provides nine reasons why documenting AISs is important: (1) depicting
how the system works, (2) training users, (3) designing new systems, (4) controlling systems
development and maintenance costs, (5) standardizing communication among system
engineers, (6) providing information to auditors, (7) documenting a businesss process, (8)
helping a company comply with the Sarbanes Oxley Act of 2002 and AS5, and (9) establishing
employee accountability for specific tasks or procedures. 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.
6-2.
Document flowcharts are a type of system flowchart. Whereas system flowcharts
are process-oriented, document flowcharts focus on the flow of physical documents through the
processing system. Document and system flowcharts are similar in that they use similar
symbols in their construction. A few additional symbols, such as envelopes and hand trucks to
depict movement of goods, are more likely to appear in document flowcharts than system
flowcharts. But 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 are really the lowest 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.
6-3.
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.
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 transferred.
2. A system designer uses it when there is interest in improving or replacing an existing
system.
3. A computer programmer can use a document flowchart when preparing system
flowcharts.
SM 6.1

4. An auditor uses it to help define, follow, and evaluate an audit trail.

5. An internal data security expert uses it to indicate weaknesses in internal control and
data control.
6-4.
Guidelines for creating document flowcharts, system flowcharts, and data flow
diagrams are listed in the text. See relevant chapter sections for document flowcharts, system
flowcharts, and data flow diagrams.
6-5.
Data flow diagrams use a square symbol to show the source or destination of data.
A circle symbol indicates a process. An open rectangle symbol indicates a store of data.
Finally, arrows depict a data flow or data stream.
6-6.
Data flow diagrams are created in a hierarchy called the top-down approach to
systems development. In this approach, developers create these diagrams in levels, beginning
with the broadest, least-detailed level, and exploding (working towards increasing refinements
of) each piece of the preceding level until the system is completely specified. The rationale
behind this approach is to keep major system objectives in view at first, and to worry about
details later after major system components are specified. However, 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.
6-7.
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 readers 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.
6-8.
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 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. Decision
tables are also useful as planning tools to system analysts and related individuals who are
charged with the task of helping create new AISs. Finally, the 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 AISs.
6-9.
Just as word processors enable users to create, store, modify, and print word
documents, CASE tools enable information technology 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 secretary uses a word processor to work on a word document. It is not necessary to use
SM 6.2

CASE programs to develop AIS documentation, but it is difficult to imagine why anyone would
not use such capable and time-saving tools.
6-10.
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 computer applications, 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, tutorial manuals, and reference materials that other users need in order to run the
applications effectively. See relevant chapter sections for guidelines to control end-user
computing.

SM 6.3

Problems
6-11.

Process

Predefined Process

Terminator

Alternate Process

Internal Storage

Decision

Document

Data

Multidocument

Preparation

Manual Input

Manual Operation

Connector

Off-page Connector

Card

Punched Tape

Summing Junction

Or

Collate

Sort

Stored Data

Delay

Direct Access
Storage

Display

Extract

Sequential Access
Storage

Merge

Magnetic Disk

SM 6.4

6-12.

g)

h)

E m p lo y e e
tim e c a r d
d a ta

K e y e n try

E m p lo y e e
tim e c a r d
d a ta

K e y e n tr y

E m p lo y e e
tim e c a rd
d a ta

to C P U

to C P U

E m p lo y e e
tim e c a r d d a ta
o n f lo p p y d i s k

i)

T h e flo w c h a r t e r s h o u ld u s e o n p a g e c o n n e c t o r s .

D e p t. 1

D e p t. 2

D e p t. 3

D e p t. 4

j)
S o u rc e
D ocum ent

S o u rc e
D ocum ent

S o u rc e
D ocum ent

S o u rc e
D ocum ent

F ile

k)

D e p t. 1

S o u rc e
D ocum ent

C opy

D e p t. 2

S o u rc e
D ocum ent

F i le

SM 6.5
Ledger

6-13.

6-14

Mark Goodwin Convenience Stores

Garcia-Lanoue Company

SM 6.6

6-15.

Ron Mitchell Manufacturing Company

S h ip p in g D e p a r t m e n t

S h ip p in g
o rd e r

D a ta E n try
D e p a rtm e n t
S h ip p i n g
o rd e r

C o m p u te r
O p e r a t io n s

F ile

K e y e n tr y

F lo p p y
d is k

V e r if y

F lo p p y
d is k

F lo p p y
d is k

SM 6.7

6-16.

Amanda M Company

C o n te x t D ia g r a m :

S a le s /
C o lle c tio n
P ro c e s s

C u s to m e rs

E m p lo y e e s
& Bank

L e v e l 0 D ia g r a m :

C u s to m e rs

S a le s
O rd e rs

P a y m e n ts
S h ip p in g
N o t ic e a n d
I n v o ic e

O rd e r
D a ta

1 .0
P ro c e s s
S a le s
O rd e rs

2 .0
P ro c e s s
S h ip m e n ts

S h ip m e n t
D a ta

3 .0
P ro c e s s
E le c t r o n ic
P a y m e n ts

S a le s
R e p o r ts
O rd e r
R e p o r ts

P aym ent
R e p o r ts

E m p lo y e e s
& Bank

SM 6.8

6-17.

Winston Beauchamp Company

S y s te m F lo w c h a r t:
P ro d u c t
f i le
M anual
c u s to m e r
o rd e r

P ro c e s s
c u s to m e r
o rd e rs

K e y e n try

C u s to m e r
o r d e r f ile

C u s to m e r
o rd e rs re p o rt

D a ta F lo w D ia g ra m :

C u s to m e r

P ro d u c t
f ile

C u s to m e r
o rd e rs

p ro d u c t
in f o r m a t io n

Key
c u s to m e r
o rd e r
d a ta

C u s to m e r
o rd e r
in f o r m a t io n

C u s to m e r
o r d e r f ile

one copy of
c u s to m e r o r d e r

f o u r c o p ie s o f
c u s to m e r o rd e r

H o ld
fo r fu rth e r
p r o c e s s in g
O th e r
d e p a rtm e n ts

SM 6.9

6-18.

LeVitre and Swezey Credit Union

C u s to m e rs

M ake
D e p o s it

E m p lo y e r s

M ake
W ith d ra w a l

M ake
D e p o s it

A c c o u n tin g
T ra n s a c tio n s

C re a te
M o n t h ly
S ta te m e n ts

U p d a te
M a s te r F ile
D a ily

G et
In fo rm a tio n
For
I n q u ir i e s
Bank
E m p lo y e e s

C r e d it U n io n
A c c o u n ts
M a s t e r F ile

P re p a re
P a y r o ll
C hecks

Pay
B i lls

C re d ito r s
For
R e n t, P h o n e ,
U t i li t ie s , E t c .

SM 6.10

6-19.

Jeffrey Getelman Publishing Company

N e w s u b s c r ip tio n
o r d e r s , r e n e w a ls ,
and checks

C hange of
a d d re s s
fo rm s

T e r m in a l

T e rm in a l

CPU

CPU
S u b s c r ib e r
M a s te r
F ile

u s in g E d it
S u b s c r ip tio n
O rd e rs P ro g ra m

u s in g C h a n g e
o f A d d re s s
P ro g ra m

S u m m a ry R e p o rt
of new
s u b s c rip tio n
re n e w a ls

S u m m a ry R e p o rt
o f a d d re s s
changes

C PU
u s in g M o n th ly
M a i li n g L a b e l
P ro g ra m

M a ilin g
L a b e ls

N o tic e s t o
n e w a n d re n e w a l
s u b s c r ib e r s

to p ro d u c tio n
d e p a rtm e n t

to m a il

SM 6.11

6-20.

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:

Not past due

Less than 30 days past due

10

11

31-60 days past due

61-90 days past due
More than 90 days past due
Account Activity:
No activity

Written communications

X
X

Partial payment

X
X

X
X

Action:
Do nothing
Send first letter of inquiry
Send second letter of inquiry

X
X

Collection agency referral

X
X

b.
This exercise requires some creativity on the part of the student. One possibility is to
give each customer a rating on the following:
a) no prior delinquency history
b) only one prior delinquency
c) only two prior delinquencies
d) more than two prior delinquencies
Mr. Smith can now make a decision based upon this categorization of customer account
history. It might also be pointed 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.

SM 6.12

6-21.
This problem requires students to draw the flowcharts in Figure 6-20. In a later part
of the problem, students are also asked to recreate the flowcharts in Figures 6-3, 6-6, 6-8, 6-11,
6-12, 6-13, 6-14, and 6-15. Because these flowchart 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
Excels 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.

Case Analyses
6-22.

Big Fun Toys (Data Flow Diagrams)

C o n t e x t D ia g r a m :

P u rc h a s in g

Vendor

P u rc h a s e
O rd e rs

C hecks

In v o ic e s
A c c o u n ts
P a y a b le
P ro c e s s in g
S y s te m

R e c e iv in g
R e p o r ts

R e g is te rs
and
R e p o rts

A c c o u n tin g
and
M anagem ent

R e c e iv in g
D e p a rtm e n t

SM 6.13

L e v e l- 0 D a t a F lo w D ia g r a m :
Vendor
In fo rm a tio n

V e n d o r D a ta
P u r c h a s in g
D e p a rtm e n t
P u rc h a s e
O rd e r

A c c o u n ts
P a y a b le
R e c e iv in g
D e p a rtm e n t

R e c e iv in g
R e p o rts

A c c o u n ts
P a y a b le
In fo rm a tio n

P ro c e s s
A c c o u n ts
P a y a b le
A c c ru a l D a ta

P aym ent
D a ta
In v o ic e

C heck
R e g is te r s
A c c ru a l

Vendor

A c c o u n tin g

P ro c e s s
Vendor
C hecks

C hecks

Vendor
P re p a re
C ash
R e q u ir e m e n t s
F o re c a s t

M anagem ent

6-23.

The Berridge Company (Document Flowcharts)

1. A document flowchart for the Berridge Company's inventory control system may be found
after #3 (below).
2. The company can eliminate one or more copies of the retail store requisition (RSR) form.
The document flowchart (and case description) indicate that a retail store prepares three
copies of the RSR form. One copy is retained in a file at the retail store, and two copies are
SM 6.14

forwarded to the warehouse. When warehouse personnel fill the order, they file one copy of
the RSR form in their own files, and forward the last copy of this form to the inventory control
department for use in updating its records. The end result of this effort is a lot of paperwork.
One way to reduce it would be to allow the warehouse personnel to create the computer
record that indicates a disbursement to an individual store, thus eliminating the need for the
third copy of the RSR form currently sent to inventory control.
The company could eliminate all copies of the RSR form by computerizing its
warehousing operations completely. In this new system, a retail store would create a
computer record for each requisition, which the system could then display onscreen or
print on a report of similar requisitions for the warehouse each day. When a requisition
order is filled, personnel in the warehouse could indicate this by entering the required
data into the computer system. This entry would trigger an inventory update in the
inventory file and eliminate the pending requisition record from the file of active
requisitions.
3. The company currently creates five copies of each purchase order. These copies are sent
to: (1) the vendor, (2) accounts payable, (3) inventory control, and (4) the warehouse. The
purchasing department retains the fifth copy. This seems excessive. It is obvious that the
company must send one copy of the purchase order to the vendor. In addition, it makes
sense for control purposes to send one copy of the purchase order to the receiving
department (for use in comparing against the subsequent bill of lading), and to retain one
copy of the PO to document the purchase itself.
It is less obvious that the company needs to create the other two copies of the purchase
order. In fact, the document flowchart indicates that both the inventory control
department and warehouse personnel perform the comparison function when goods
arrive - a duplication of effort. Similarly, the company can probably eliminate the copy it
currently prepares for accounts payable. Instead, warehouse personnel can attach its
copy to the receiving report, and the accounts payable department can use the
warehouse copy to prepare a check to the vendor.

SM 6.15

A document flowchart for the Berridge Companys inventory control system.

R e t a il S t o r e

R e t a il S t o r e
r e q u i s i t io n
(R S R )

In v e n to ry c o n tro l

W a re h o u s e

P u r c h a s in g

Vendor

1
2

R SR

R SR

A c c o u n t s P a y a b le

R SR

R SR

F i le

F i le
1
PR
T ir e s a n d
s u p p l ie s

T ire s a n d
s u p p l ie s

In v e n to ry
re c o rd

P u rc h a s e
R e q u i s it i o n
(P R )

P re p a re
p u rc h a s e
o rd e r

2
PR

P u rc h a s e
o rd e r
(P O )

F i le

C o m p a re

1
PO

3
PO

4
PO

5
PO
PO

PO

PO

In v o ic e
(IN V )

IN V

PO

IN V
F i le
F ile
T ir e s a n d
s u p p lie s

T ire s a n d
s u p p l ie s

R e c e iv in g
re p o rt
(R R )
3
R R

1
R R

3
R R

R R

2
4
R R
R R

F i le
C o m p a re
C o m p a re

2
PO

4
PO

1
1

4
R R

F i le

SM 6.16

IN V

R R

C heck

6-24.

Classic Photography Inc. (Systems Flowcharts)

E m p lo y e e
R e q u e s ts

P u rc h a s e
R e q u is it i o n

E n te r
O rd e r

C r e a te
P u rc h a s e
O rd e rs

Fax
to
S u p p l ie r
P u rc h a s e
O rd e rs

S u p p l ie r

O pen
PO

M e r c h a n d is e
A r r iv e s

C he ck
M e r c h a n d is e
vs P O

PO
P u rc h a s e
O rd e r

E n te r
O rd e r

P re p a re o p e n
in v o ic e s f o r
paym ent

S u p p l ie r

S u p p l ie r
In v o ic e s

C he ck

In v o ic e

SM 6.17

Phone
C a ll if
N e c e s s a ry

The systems flowchart is valuable because it shows the flow of activities and documents within
the sales/collection process. The flowchart is particularly useful for identifying redundant,
unnecessary, and risky activities.
6-25.

The Dinteman Company (Document Analysis)

1. a) Data items which should be included on a repair/maintenance work order document are
as follows:
1) Job identification - department (or plant) for which work is to be done, machine or
work station, and general description of job.
2) Starting and completion dates - both estimated and actual.
3) Materials and supplies data - estimated and actual quantities and costs.
4) Labor data - estimated hours, actual hours cost, and employee number for each job
or person completing the work.
5) Applied overhead.
b) At least four copies of the work order would be required with a possible fifth copy needed
if a work order summary is not prepared. The work order would be prepared in the
R & M Department and given to the supervisor for review and scheduling. The work
order would then be used by the person responsible for the work by recording the actual
hours spent on the job and the actual materials and supplies required to complete the
job. After the job is completed, the work order would be forwarded to accounting for
costing and charging. The distribution of each copy of the work order would be as
follows:
Original (Copy 1) - Once the job is completed and all data has been recorded on the
work order, this copy is forwarded to the Accounting Department for costing and then
filed in the Accounting Department.
Copy 2 - This copy is also fully completed and is filed in the R & M Department in a
completed work order file.
Copy 3 - This copy would be kept by the R & M Department in a file of scheduled jobs
until the work is completed. A reference file is needed for all work orders while the job is
in process. Once this job is completed, Copy 3 would be attached to Copy 2 and filed
with Copy 2.
Copy 4 - This copy would be sent to the Production Department where the work is being
done to acknowledge the actual scheduling of the job.
An evaluation of the performance of the R & M Department would probably be done in
three departments as explained below:
The department which requests the work should compare the estimated charges
indicated on the Work Order Request with the actual charges and the timeliness of the
work, (e.g., the estimated and actual starting and completion times on the Work Order).
If the work is not timely or if the actual charges vary considerably from the estimate, the
management of the Production Department would contact the supervisor of the R & M
Department for an explanation.
The supervisor of the R & M Department would conduct a self-evaluation by comparing
the Work Order Request and the completed Work Order. The supervisor would want to
be sure the actual times and charges were close to the original estimates. Such a
SM 6.18

comparison would be important for evaluating the staff in the department and also for
preparing future estimates.
The Accounting Department (or some other appropriate department) would probably
conduct a review of the R & M Department's work. The estimates and actual results
shown on the Work Order would be compared. Types of repair and maintenance jobs
which have standard times for completion would be compared with actual times required
for the work in order to evaluate the department's performance.
2.

See document flowchart on following page.

SM 6.19

P R O D U C T IO N
D EPAR TM EN T

R E P A IR & M A IN T E N A N C E
D EPAR TM EN T

A C C O U N T IN G
D EPAR TM EN T

4
3
S e r v ic e
R equest

F il e

2
S e r v ic e
R equest

P re p a re c o s t
e s t im a t e s f o r
m a t e r i a ls a n d
la b o r. s c h e d u le
t im e f o r w o r k

P ost
e s t im a t e s
and
suggest
T im e

3
2

2
S e r v ic e
R equest

S e r v ic e
R equest

F il e
W o rk o u t a n y
s c h e d u l in g
p r o b l e m s w it h
R & M

R e v ie w
and
a p p ro v e

2
S e r v ic e
R equest

S e r v ic e
R equest

P re p a re
w o rk
o rd e r

F il e

W o rk O rd e r
( A c k n o w le d g e m ent copy)

2
S e r v ic e
R equest

F il e

3
W o rk
O rd e r

F il e
F il e

R e c o rd a c tu a l
m a te r ia l a n d
s u p p l ie s u s e d
a n d la b o r t im e
r e q u ir e d

A c t iv ity
r e c o rd in g

2
W o rk O rd e r
(c o m p le te d )

W o rk O rd e r
S u m m a ry

W o rk
O rd e r

C o m p le t e
d e ta ile d
c o s tin g

F il e

W o rk O rd e r
S u m m a ry

2
W o rk O rd e r
( c o m p le te d )

3
F il e

2
W o rk O rd e r
S u m m a ry

F il e

SM 6.20