structured analysis & oe/s alternatives, specifications focusing on the revenue cycle
TRANSCRIPT
Structured Analysis & OE/S
Alternatives, specifications
Focusing on the revenue cycle
Learning Objectives
Know goals, plans, tasks, tools, & results of systems analysis
Understand/appreciate costs of developing, maintaining, operating information system
Perform some analysis tasks on the Revenue Cycle.
Identify controls.
ExternalSources
H/W - S/WVendors
1.0SystemsSurvey
2.0Structured
SystemsAnalysis
3.0SystemsSelection 4.0
StructuredSystemsdesign
5.0Systems
Implemen-tation
6.0PostImp.
review
7.0SystemsMainte-nance
Requestfor systems
development
Approvedfeasibillitydocument
Miscenvironmental
information
Physicalrequirements
Logicalspecifications
Approveddesign
document
Approvedconfiguration
plan
AvailableH/W & S/W
Request forProposal
Vendorproposals
Contract
Purchasedsoftware
Hardware
Projectcompletion
report
SystemsAnalysis
SystemsDesign
SystemsImplem
-entation
SystemsOperation
SDLC – Structured System Analysis
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Systems Analysis Goals
Define problem precisely (make all mistakes early!)
Devise alternative designs (solutions) Choose & justify one of the alternatives Develop logical specifications for selected
design Develop physical requirements for selected
design Develop budget for next two SD phases
(systems design; systems implementation)
Systems Analysis Plans & Documents
2.1Study &
documentcurrent
physicalsystem
2..2Extract &document
current logicalequivalent
2.3Define
future logicalsystem
2.4Design
alternativephysicalsystems
2.5Select bestalternative
physicalsystem
2.6Complete/package
approvedsystemsanalysis
document
Approvedfeasibilitydocument
Currentphysicalsystem
Currentlogicalsystem
Futurelogicalsystem
Alternativefuture
physicalsystems
Cost/ effectivenessstudy
Selectedalternative
physicalsystem
Logicalspecifications
Physicalrequirements
See Chapter 3
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Accountant’s Involvement in Systems Analysis
Systems specialist or consultant Staff accountant
User/requester member of analysis team interviewee by analysis team
Internal auditor consultant to analysis team agent of management/board of directors
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Systems Analysis Document (1)
Executive summary Project summary Summary of proposed system Summary of impact of new system Summary of cost/effectiveness &
recommendations Systems analysis summary
facts gathered analysis performed
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Systems Analysis Document (2)
User requirements for new system Operating requirements Information requirements Control requirements
Description of future logical system DFDs, data dictionaries, narrative description Summary of improvements from new system
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Systems Analysis Document (3)
Description of future physical system DFDs, flowcharts, narrative Summary of cost/benefit improvements -
new system New system constraints
Hardware & software constraints Interface constraints Contractual/legal requirements
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Systems Analysis Document (4)
Design phase budget & schedule Design phase personnel/computer
requirements Development schedule
Physical requirements Workload & volume Response times Functional layouts of screens & reports System growth
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Systems Analysis Document (5)
Recommendations - project leader Approvals Attachments
Approved feasibility document Analysis memos, summaries, tables,
graphs, charts Cost/effectiveness schedules
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Systems Analysis Tools and Documentation
Memos summarizing interview & observations (walkthroughs)
Narratives describing observations Charts, tables, graphs Completed questionnaires (or summaries) Flowcharts Physical DFDs Organization charts
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Future logical system from current
Add new activities Remodel existing activities Add or change control activities
(Compare changes 16.6 vs. 16.7
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Prioritizing User Requirement Priorities
Critical : if this requirement is not met the entire process or, worse, company is jeopardized.
Important: If this requirement is not meet, the company, department, team or person will be negatively affected, but system is still useful and useable.
Useful: If this requirement is not met, users may be less than satisfied, but impact is minimal.
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Future Physical from Future Logical
Decide which processes will be manual/automated
Decide which would be immediate processing and which would be batch
Complete specifications for new system alternative technologies (EDI, mail) alternative modes (immediate/batch)
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Select Best Alternative Physical System
Analysis team recommends IT steering committee ratifies - or sends
back Analysis team conducts cost/effectiveness
study cost/benefit analysis (efficiency criteria) effectiveness analysis
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Cost/Benefit Analysis
Estimate costs of new system direct costs - equipment, personnel, site,
materials, supplies indirect costs - overhead-type costs,
utilities Estimate benefits of new system
direct benefits - reduced personnel/hardware costs
indirect benefits - improved revenue from improved customer support; reduced inventory &/or accounts receivable
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Cost / Benefit Analysis (2)
Do not apply sunk costs. Money already spent cannot be
recovered. Make decision looking ahead.
Do include differential cost analysis Impact of increasing production, revenue. Requires accurate estimating.
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Effectiveness Analysis
Analysts & user list all relevant criteria, including costs & benefits and intangibles
Users & analysts jointly assign subjective rankings for each criterion for each alternative
Team ranks alternatives by summarizing ratings
Team recommends best alternative to steering committee
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Logical Specifications
Will be used in systems selection or design Executive summary - DFD & narrative for major
features, objectives, benefits & constraints Application description - DFD & narrative for each
system function Information requirements - each input, output, &
file: purpose, description, origin, major elements, frequency, volume, distribution
Miscellaneous functions
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Physical Requirements
Used in systems selection to acquire equipment Items to be specified
Data storageFile size, growth, activity, access requirementsTransaction volume/expected growthPeripherals - printers, PCs, plottersCommunicationsBackup & securityProcessing approachesReliabilityOutput distributionResponse time requirements
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Budget & Schedule
Budget - from cost/benefit analysis - update of projections made during systems survey
Schedule - update of preliminary schedules made during systems survey
Finally, the document should have the proper approvals
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The Order Entry/Sales
(OE/S)
Process
Learning Objectives
Understand OE/S process and its environment.
Appreciate potential of OE/S process to assist management decision making.
Examine how systems integration can improve effectiveness and efficiency of OE/S process.
Learning Objectives (2)
Understand logical and physical characteristics of OE/S.
Establish familiarity of CRM and ERP.
Know operations & information process control goals and control plans for OE/S.
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Revenue Cycle (merchandising)
Order entry/sales process
Inventoryprocess
Generalledger
Billing/accounts
receivable/cash receipts
process
RevenueCycle
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OE/S Horizontal Information Flows
Customer places order S.O. dept. requires CR approval from CR
dept. CR dept. informs S.O. dept. of decision S.O. dept. acknowledges customer order S.O. dept. notifies shipping dept. of S.O. S.O. dept. notifies warehouse, B/AR/CR
process, payroll process, & General ledger Cont…..
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OE/S Horizontal Information Flows (2)
Warehouse sends completed picking ticket to shipping department
Shipping dept. informs S.O. dept of shipment
Shipping dept. informs carrier & B/AR/CR process of shipment
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Manager,advertising
Manager,raw productdevelopment
Manager,customer sales
& service
Manager,marketing
intelligence
Manager,sales
promotion
Supervisor,sales orderdepartment
VPMarketing
Vertical perspective of the OE/S system
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OE/S Context Diagram
Customer
Customer
Carrier
B/AR/CRSystem
OE/SSystem
CustomerInquiry
CustomerOrder
CustomerAcknowledgement
CustomerReply
Completedpacking
slip
Bill oflading
Salesorder
notificationShipping's
billingnotification
P/AP/CDsystem
(payroll)Commissions
Customer
B/AR/CRprocess
P/AP/CD(payroll)
Carrier
1.0Validate
SalesOrder
2.0Complete
Pickingticket
3.0Executeshipping
notice
Sales ordermaster data
Marketingdata
Inventorymaster data
Shipping noticedata
Sales ordermaster data
Customermaster data
Sales orderNotification
Shipping'sbilling notification
Bill of lading
Completedpacking slip
Completedpicking ticket
Picking ticket
Commissions
CustomerOrder
Customeracknowledgement
Completed pickingticket data
Packingslip
Accounts receivablemaster data
OE/S Level 0 DFD
1.1Verify
inventoryavailable
1.2Checkcredit
1.3Complete
salesorder
Sales ordermaster file Inventory
master file
Customermaster file
A/R masterfile
Inventorymaster file
Customerorder
Marketingfile
Inventoryavailable
order
Reject
Backorder
Reject
Acceptedorder
GL inventorysales update
CommissionsPickingticket
Packingslip
Customeracknowledgement
Sales ordernotification
OE/S Level 1DFD
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Level 1 DFD narrative 1.1 - Verify inventory available
inquiry of inventory master file to check reject or make “backorder” if not available;
send to next process if available record demographic and other info in
marketing file 1.2 - Check credit
check to see if valid customer check A/R master file to see if credit limit is
ok if invalid or over limit, reject; if not, send to
next process
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Level 1 DFD narrative (2)
1.3 Complete sales order add pricing info from inventory file update inventory file - reduce quantity on
hand notify GL inventory has been reduced and
cost of goods sold increased update Sales Order master file to show
completed order Notify P/AP/CD that commissions are due disseminate sales order
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Dissemination documents
Picking ticket - authorizes warehouse to “pick” goods, send to shipping. Has warehouse location.
Packing slip - attached to outside of carton; identifies customer and goods.
Customer acknowledgement - notifies customer of acceptance of order; shipping date.
Sales order notification - internal form sent to billing department re pending shipment
Bill of lading - contract between shipper & carrier; carrier gets copy, shipper keeps copy.
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OE/S Files
Marketing file - sales-oriented data, some from OE/S, other from Marketing information system
Customer master file - data about customer characteristics: name, address, credit limit, etc.
Sales order master file - file of “open” sales orders; can be checked periodically/follow up.
Completed picking ticket file - used for follow up and audit purposes.
Shipping notice file - used for follow up and audit purposes
OE/S ERD p.331
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In Class Assignment
Prepare complete invoice from data available on 10.11
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OE/S Data Entry
41System Flowchart 1
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System Flowchart 2
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System Flowchart 3
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Six Process Controls
Transaction authorization – valid and in accordance with management objectives.
Segregation of duties – authorization separate from processing; asset custody separate from record-keeping; structure for two party approval.
Supervision – compensate for segregation limits. Accounting records – audit trail obligation. Access – prevent unauthorized or unintended
destruction, alteration, misuse. Independent verification – after the fact check on
correctness, integrity, and performance.Note: applicable to all cycles
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Authorization Controls
Proper authorization of transactions (documentation) should occur so that only valid transactions get processed.
Within the revenue cycle, authorization should take place when: a sale is made on credit (authorization) a cash refund is requested (authorization) posting a cash payment received to a
customer’s account (cash pre-list)
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Segregation of FunctionsThree Rules
1. Transaction authorization should be separate from transaction processing.
2. Asset custody should be separate from asset recordkeeping.
3. The organization should be so structured that the perpetration of a fraud requires collusion between two or more individuals.
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Segregation of Functions
Sales Order Processing credit authorization separate from SO processing inventory control separate from warehouse accounts receivable sub-ledger separate from general
ledger control account Cash Receipts Processing
cash receipts separate from accounting records accounts receivable sub-ledger separate from general
ledger
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Supervision
Supervision of employees serves as a deterrent to dishonest acts and is particularly important in the mailroom(!?!).
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Accounting Records
With a properly maintained audit trail, it is possible to track transactions through the systems and to find where and when errors were made:
pre-numbered source documents special journals subsidiary ledgers general ledger files
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Access Controls
Access to assets and information (accounting records) should be limited.
Within the revenue cycle, the assets to protect are cash and inventories and access to records such as the accounts receivable subsidiary ledger and cash journal should be restricted.
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Independent Verification
Physical procedures as well as recordkeeping should be independently reviewed at various points in the system to check for accuracy and completeness:
shipping verifies the goods sent from the warehouse are correct in type and quantity
warehouse reconciles the stock release document (picking slip) and packing slip
billing reconciles the shipping notice with the sales invoice
general ledger reconciles journal vouchers from billing, inventory control, cash receipts, and accounts receivable
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Control Considerations forComputer-Based Systems
Authorization - in real-time systems, authorizations are automated: programmed decision rules must be closely monitored.
Segregation of Functions - some consolidation of tasks by the computer; protect the computer programs--coding, processing and maintenance should be separated.
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RFID – Radio Frequency ID tags
Unique identifier with read/transmission capabilities for any item (living or manufactured).
Unit cost to drop to pennies. Improving read and transmission capabilities. Wal-mart requiring major supplier use by 2005.
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Control Considerations forComputer-Based Systems
Supervision - in POS systems, the cash register’s internal tape or database is an added form of supervision.
Access Control - magnetic records are vulnerable to both authorized and unauthorized exposure and should be protected.
Must have limited file accessibility Computer programs must be safeguarded and
monitored
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Control Considerations for Computer-Based Systems
Accounting Records - rest on reliability and security of magnetically stored data. The accountant should be skeptical about accepting the accuracy of hard-copy printouts of journals and ledgers.
Backup is a concern for direct access files, and the system needs to ensure that backup of all files is continuously kept.
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Microcomputer-Based Accounting Systems
Used by small firms and some large decentralized firms
Allow one or few individuals to perform entire accounting function
Most systems are divided into modules general ledger inventory control payroll cash disbursements purchases and accounts payable cash receipts sales order
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Microcomputer Control Issues
Segregation of Duties - tend to be inadequate and should be compensated for with increased supervision, detailed management reports, and frequent independent verification
Access Control - access controls to the data stored on the computer tends to be weak; methods such as encryption and disk locking devices should be used
Accounting Records - computer disk failures cause data losses; external backup methods need to be implemented to allow data recovery
Control Goals of the Business Process
Ensure effectivenessof operations by
achieving the followingprocess goals
Ensureefficientemploy-ment of
resources
Ensuresecurity
ofresources
Control Goal of the Operations Process
Control Goals of the Information Process
For salesorder inputs,
ensure:
For sales orderand inventorymaster data,
ensure:
For shippingnotice inputs,
ensure:
For salesorder masterdata, ensure:
A B C D IVICIA IVICIAUCUA UCUAP-1
P-2
P-3
P-4
P-5 P-5
P-6 P-6
P-7
RecommendedControl Plans
P-1: Independent customermaster file maintenance P-1 P-1
P-2: Enter data close to location where
customer order is preparedP-2 P-2 P-2 P-2 P-2
P-3: Customer credit checkP-3 P-3
P-4: Independent pricing daa
P-5: Independent shipping authorization
P-6: Packing slip tickler file
P-7: Completed picking ticket file
Key: possible system goals:
A - Provide timely responses to customer inquiriesB - Provide timely acknowledgement of customer ordersC - Provide assurance of customers’ creditworthinessD - Provide timely shipment of goods to customers
IV = input validity
IC = input completeness
IA = input accuracy
UC = update completeness
UA = update accuracy
Control Matrix (1)
Control Goals of the Business Process
Ensure effectivenessof operations by
achieving the followingprocess goals
Ensureefficientemploy-ment of
resources
Ensuresecurity
ofresources
Control Goal of the Operations Process
Control Goals of the Information Process
For salesorder inputs,
ensure:
For sales orderand inventorymaster data,
ensure:
For shippingnotice inputs,
ensure:
For salesorder masterdata, ensure:
A B C D IVICIA IVICIAUCUA UCUAP-8 P-8 P-8
P-9 P-9 P-9 P-9 P-9 P-9 P-9 P-9
P-10 P-10 P-10 P-10 P-10
P-11P-11 P-11 P-11 P-11
P-12 P-12
P-13P-13 P-13 P-13
P-14 P-14 P-14 P-14 P-14
RecommendedControl Plans
Key: possible system goals:
A - Provide timely responses to customer inquiriesB - Provide timely acknowledgement of customer ordersC - Provide assurance of customers’ creditworthinessD - Provide timely shipment of goods to customers
IV = input validity
IC = input completeness
IA = input accuracy
UC = update completeness
UA = update accuracy
P-9
P-14
P-8: 1 for 1 checking of goods, picking
ticket and packing slip
P-9: Populate inputs with master dataP-9
P-10: Online prompting P-10
P-11: Preformatted screensP-11
P-12: Interactive feedback checks
P-13: Programmed edit checks P-14: Compare input data with
master data
Control Matrix (2)
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Key Terms
Structured systems analysis
Approved systems analysis document
Alternative future physical systems
Cost/benefit analysis Cost/effectiveness study Order/entry sales (OE/S)
process Picking ticket Packing slip Data mining Data warehousing
Data marts Customer
acknowledgement Bill of lading Customer relationship
management (CRM) systems
Sales order
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Solution P10 - 8
Process Subsidiary Functions Inputs Outputs
1.0 Respond tocustomer requests
1.1 Edit and route Customer inquiryCustomer order
Edited inquiryEdited orderMarketing data
1.2 Respond to inquiry Edited inquiryCustomer master dataInventory master dataSales order master data
Customer replyMarketing data
2.0 Validate sales order 2.1 Check credit Edited orderCustomer master dataAccounts receivable master dataSales order master data
Credit-approved order
2.2 Verify inventory availability
Credit-approved orderInventory master data
Accepted order
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Solution P10-8 cont.
3.0 Complete picking ticket 3.1 Match goods with picking ticket
Picking ticket Matched picking ticket
3.2 Enter quantities picked Matched picking ticket Completed picking ticket
4.0 Execute shipping notice 4.1 Match orders Packing slipCompleted picking ticket
Matched sales orderCompleted picking ticket data
4.2 Produce shipping notice Matched sales orderSales order master data
Shipping's inventory notificationShipping's billing notificationBill of ladingCompleted packing slipShipping notice dataSales order master data
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Recommendations
Ch. 5: RQ 1,2,3,6,7d,9; DQ 1,3 Using Access to generate queries Exporting Access data to XL for
reporting.