CHAPTER THREE

3. SYSTEM DEVELOPMENT AND DOCUMENTS

Documentation explains how a system works, including the who, what, when, where, why, and
how of data entry, data processing, data storage, information output, and system controls.
Popular means of documenting a system include diagrams, flowcharts, tables, and other
graphical representations of data and information. These are supplemented by a narrative
description of the system, refers to a written step-by-step explanation of system components
and interactions.

In this chapter, we explain three common systems documentation tools:

data flow diagrams, flowcharts, and business process diagrams.

Documentation tools are important on the following levels:

1. At a minimum, you must be able to read documentation to determine how a system works.

2. You may need to evaluate documentation to identify internal control strengths and
weaknesses and recommend improvements as well as to determine if a proposed system meets
the company’s needs.

3. More skill is needed to prepare documentation that shows how an existing or proposed system
operates. This chapter discusses the following documentation tools:

1. Data flow diagram (DFD), a graphical description of data sources, data flows, transformation
processes, data storage, and data destinations

2. Flowchart, which is a graphical description of a system. There are several types of flow
charts, including:

a. Document flowchart, which shows the flow of documents and information between
departments or areas of responsibility

b. System flowchart, which shows the relationship among the input, processing, and output in
an information system

c. Program flowchart, which shows the sequence of logical operations a computer performs as
it executes a program.

3. Business Process diagrams, which is a graphical description of the business processes used
by a company

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 Accountants use documentation techniques extensively. Auditing standards require that
independent auditors understand the automated and manual internal control procedures an entity
uses. One good way to gain this understanding is to use business process models or flowcharts to
document a system, because such graphic portrayals more readily reveal internal control
weaknesses and strengths.

The Sarbanes-Oxley Act (SOX) of 2002 requires an internal control report in public company
annual reports that (1) states that management is responsible for establishing and maintaining an
adequate internal control structure and (2) assesses the effectiveness of the company’s internal
controls. SOX also specifies that a company’s auditor must evaluate management’s assessment
of the company’s internal control structures and attest to its accuracy. The auditor’s attestation
should include a specific notation about significant defects or material noncompliance found
during internal control tests. This means that both the company and its auditors have to document
and test the company’s internal controls. To do so, they must be able to prepare, evaluate, and
read different types of documentation, such as business process models and flowcharts.
Documentation tools are also used extensively in the systems development process. In addition,
the team members who develop information systems applications often change, and
documentation tools help the new team members get up to speed quickly. Documentation is
easier to prepare and revise when a software package is used. Once a few basic commands are
mastered, users can quickly and easily prepare, store, revise, and print presentation-quality
documentation.

3.2. Data flow diagram (DFD)

Data flow diagram (DFD) - A graphical description of the flow of data within an organization,
including data sources/ destinations, data flows, transformation processes, and data storage

NAME EXPLANATION

Data sources and destinationns The people and organizations that send data to and
receive data from the system are represented by square boxes. Data destinations are also referred
to as data sinks.

Data flows: The flow of the data into or out of a process is represented by curved or
straight lines with arrows.

As you probably inferred from the previous slides, if a data flow is two-way, use a bi-directional
arrow.

Transformation processes: The processes that transform data from inputs to outputs are
represented by circles. They are often referred to as bubbles.

Data store: The storage of data is represented by two horizontal lines.

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Data source - The entity that produces or sends the data that is entered into a system.

Data destination - The entity that receives data produced by a system.

Data flow - The movement of data among processes, stores, sources, and destinations.

Process - The action that transforms data into other data or information.

Data store - The place or medium where system data is stored.

Context diagram - Highest-level DFD; a summary-level view of a system, showing the data

processing system, its input(s) and output(s), and their sources and destinations.

ACTIVITIES DATA INPUTS DATA OUTPUTS

Update employee/payroll file New-& change employee form Updated employee/payroll file

Pay employees

3.2.1. Guidelines for Drawing a DFD

2. Ignore certain aspects of the system. A DFD is a diagram of the origins, flow, transformation,
storage, and destinations of data. Only very important error paths are included; unimportant
error paths are ignored. Determining how the system starts and stops is not shown. 3.
Determine system boundaries. Determine what to include and exclude. Include all relevant
data elements, because excluded items will not be considered during system development.

4. Develop a context diagram. A context diagram depicts system boundaries. In the diagram’s
center is a circle with the name of the system. Outside entities the system interacts with
directly are in boxes on either side, connected by data flows depicting the data passed
between them. DFDs in successively more detail depict data flows inside the system.

5. Identify data flows. Identify all data flows (significant movement of data) entering or
leaving the system, including where the data originate and its final destination. All data
flows come from and go to a transformation process, a data store (file), or a source or
destination. Data flows can move in two directions, shown as a line with arrows on both
ends.

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6. Group data flows. A data flow can consist of one or more pieces of datum. Data elements
that always flow together should be grouped together and shown as one data flow until they
are separated. If the data do not always flow together, show them as separate data flows.

7. Identify transformation processes. Place a circle wherever work is required to transform one
data flow into another. All transformation processes should have one or more incoming and
outgoing data flows.

8. Group transformation processes. Transformation processes that are logically related or occur
at the same time and place should be grouped together. Do not combine unrelated items into
a single transformation process. If data are not processed together, or are sometimes
processed differently, separate them. 9. Identify all files or data stores. Identify each
temporary or permanent data repository, and identify each data flow into and out of it.

10. Identify all data sources and destinations. Include them on the DFD.

11. Name all DFD elements. Except for data flows into or out of data stores (the data store name
is usually sufficient to identify the data flow), data elements should be given unique and
descriptive names representing what is known about them. Naming data flows first forces
you to concentrate on the all-important data flows, rather than on the processes or stores.
Processes and data stores typically take their names from the data inflows or outflows.
Choose active and descriptive names, such as “update inventory” and “validate transaction,”
rather than “input data” or “update process.” Process names should include action verbs
such as update, edit, prepare, reconcile, and record.

12. Subdivide the DFD. A cluttered DFD is hard to read and understand. If you have more than
five to seven processes on a page, decompose the context diagram into high-level processes.
Explode these high-level processes into successively lower-level processes.

13. Give each process a sequential number. Giving each process a sequential number (lower to
higher) helps readers navigate among the DFD levels.

14. Refine the DFD. Work through data flows several times. Each subsequent pass helps refine
the diagram and identify the fine points. Organize the DFD to flow from top to bottom and
from left to right.

15. Prepare a final copy. Do not allow data flow lines to cross each other; if necessary, repeat a
data store or destination. Place the name of the DFD, the date prepared, and the preparer’s
name on each page.

3.3. Flowcharts

A flowchart is a pictorial, analytical technique used to describe some aspect of an information

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performed and how documents flow through the organization. They are also used to analyze how
to improve business processes and document flows. Most flowcharts are drawn using a software
program such as Visio, Word, Excel, or PowerPoint. Flowcharts use a standard set of symbols to
describe pictorially the transaction processing procedures a company uses and the flow of data
through a system. Flowcharting symbols are divided into four categories

1. Input/output symbols show input to or output from a system.

2. Processing symbols show data processing, either electronically or by hand.

3. Storage symbols show where data is stored.

4. Flow and miscellaneous symbols indicate the flow of data, where flowcharts begin or end,
where decisions are made, and how to add explanatory notes to flowcharts.

Symbol Name Explanation

Document An electronic or paper document or report

Multiple copies of one paper document = Illustrated by overlapping the document

symbol and printing the document number

on the face of the document in the upper right corner

Electronic output = Information displayed by an electronic output

device such as a terminal, monitor, or screen

Electronic data entry = Electronic data entry device such as a

computer, terminal, tablet, or phone

Processing Symbol

Computer processing = A computer‐ performed processing function;

Usually results in a change in data or information

Manual operation = A processing operation performed manually