Page 86 - Accounting Information Systems

CHAPT E R 2 Introduction to Transaction Processing 57

the system. The two diagrams are related through data; each data store in the DFD represents a corre-
sponding data entity in the ER diagram. Figure 2-15 presents the ER diagram for the DFD in Figure 2-13.

SYSTEM FLOWCHARTS
A system flowchart is the graphical representation of the physical relationships among key elements of a
system. These elements may include organizational departments, manual activities, computer programs,
hard-copy accounting records (documents, journals, ledgers, and files), and digital records (reference
3
files, transaction files, archive files, and master files). System flowcharts also describe the type of com-
puter media being employed in the system, such as magnetic tape, magnetic disks, and terminals.
The flowcharting examples in the following sections illustrate techniques for representing both manual
and computer-based accounting processes. We begin by documenting manual procedures. We will add
computer elements to the system later.

Flowcharting Manual Activities
To demonstrate the flowcharting of manual activities, let’s assume that an auditor needs to flowchart a
sales order system to evaluate its internal controls and procedures. The auditor will begin by interviewing
individuals involved in the sales order process to determine what they do. This information will be cap-
tured in a set of written facts similar to those below. Keep in mind that the purpose here is to demonstrate
flowcharting. Thus, for clarity, the system facts are intentionally simplistic.
1. A clerk in the sales department receives a hard-copy customer order by mail and manually prepares
four hard copies of a sales order.
2. The clerk sends Copy 1 of the sales order to the credit department for approval. The other three cop-
ies and the original customer order are filed temporarily, pending credit approval.
3. The credit department clerk validates the customer’s order against hard-copy credit records kept in
the credit department. The clerk signs Copy 1 to signify approval and returns it to the sales clerk.
4. When the sales clerk receives credit approval, he or she files Copy 1 and the customer order in the
department. The clerk sends Copy 2 to the warehouse and Copies 3 and 4 to the shipping department.
5. The warehouse clerk picks the products from the shelves, records the transfer in the hard-copy stock
records, and sends the products and Copy 2 to the shipping department.
6. The shipping department receives Copy 2 and the goods from the warehouse, attaches Copy 2 as a
packing slip, and ships the goods to the customer. Finally, the clerk files Copies 3 and 4 in the ship-
ping department.
Based on these facts, the auditor can create a flowchart of this partial system. It is important to note
that flowcharting is as much an art form as it is a technical skill, giving the flowchart author a great deal
of license. Nevertheless, the primary objective should be to provide an unambiguous description of the
system. With this in mind, certain rules and conventions need to be observed:
1. The flowchart should be labeled to clearly identify the system that it represents.
2. The correct symbols should be used to represent the various entities in the system.
3. All symbols on the flowchart should be labeled.
4. Lines should have arrowheads to clearly show the process flow and sequence of events.
5. If complex processes need additional explanation for clarity, a text description should be included on
the flowchart or in an attached document referenced by the flowchart.

3 This terminology is a slight departure from the accounting convention that I have followed in earlier editions of this text in which a
distinction is drawn between document flowcharts and system flowcharts. The term document flowchart was coined at a time
when systems that exclusively employed manual recording and posting activities, and paper (hard copy) documents, journals, and
ledgers were commonplace. Today, few functional systems fall into this category; even basic modern accounting systems
incorporate both manual and computer operations. Apart from being obsolete, I have found that the term document flowchart can
be misleading for students attempting to master flowcharting. Therefore, in this text we will use the term system flowchart or
simply flowchart for representing the physical accounting system, whether it is manual, computer-based, or has elements of both.