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CHAPT E R 2 Introduction to Transaction Processing 69

tend to have shorter development periods and are easier for programmers to maintain. On the other hand,
as much as 50 percent of the total programming costs for real-time systems are incurred in designing the
user interfaces. Real-time systems must be friendly, forgiving, and easy to work with. Pop-up menus,
online tutorials, and special help features require additional programming and add greatly to the cost of
the system.
Finally, real-time systems require dedicated processing capacity. Real-time systems must deal with
transactions as they occur. Some types of systems must be available 24 hours a day whether they are
being used or not. The computer capacity dedicated to such systems cannot be used for other purposes.
Thus, implementing a real-time system may require either the purchase of a dedicated computer or an
investment in additional computer capacity. In contrast, batch systems use computer capacity only when
the program is being run. When the batch job completes processing, the freed capacity can be reallocated
to other applications.

Operational Efficiency
Real-time processing in systems that handle large volumes of transactions each day can create operational
inefficiencies. A single transaction may affect several different accounts. Some of these accounts, how-
ever, may not need to be updated in real time. In fact, the task of doing so takes time that, when multi-
plied by hundreds or thousands of transactions, can cause significant processing delays. Batch processing
of noncritical accounts, however, improves operational efficiency by eliminating unnecessary activities at
critical points in the process. This is illustrated with an example later in the chapter.

Efficiency Versus Effectiveness
In selecting a data processing mode, the designer must consider the trade-off between efficiency and effec-
tiveness. For example, users of an airline reservations system cannot wait until 100 passengers (an efficient
batch size) assemble in the travel agent’s office before their transactions are processed. When immediate
access to current information is critical to the user’s needs, real-time processing is the logical choice. When
time lags in information have no detrimental effects on the user’s performance and operational efficiencies
can be achieved by processing data in batches, batch processing is probably the superior choice.

ALTERNATIVE DATA PROCESSING APPROACHES
Legacy Systems Versus Modern Systems
Not all modern organizations use entirely modern information systems. Some firms employ legacy
systems for certain aspects of their data processing. When legacy systems are used to process financially
significant transactions, auditors need to know how to evaluate and test them. We saw in Chapter 1 that
legacy systems tend to have the following distinguishing features: they are mainframe-based applications;
they tend to be batch oriented; early legacy systems use flat files for data storage, but hierarchical and
network databases are often associated with later-era legacy systems. These highly structured and inflexi-
ble storage systems promote a single-user environment that discourages information integration within
business organizations.
Modern systems tend to be client-server (network)–based and process transactions in real time. Although
this is the trend in most organizations, please note that many modern systems are mainframe-based and use
batch processing. Unlike their predecessors, modern systems store transactions and master files in relational
database tables. A major advantage of database storage is the degree of process integration and data sharing
that can be achieved.
Although legacy system configurations no longer constitute the defining features of accounting infor-
mation systems (AIS), they are still of marginal importance to accountants. Therefore, for those who seek
further understanding of legacy system issues, detailed material on transaction processing techniques
using flat-file structures is provided in Section B of the Appendix to this chapter.
The remainder of the chapter focuses on modern system technologies used for processing accounting
transactions. Some systems employ a combination of batch and real-time processing, while others are