Chapter 5-CIS

• Systems development process


  A series of activities for organizations to acquire IT-based information systems
• Auditors' interest in the systems development process


  • Financial transactions involved in creating entity-wide information systems require planning, authorization, scheduling, accounting, and control
  • The quality of accounting information presented in financial statements depends on the quality of the accounting information systems developed
• Flaws in financial applications can lead to corrupt financial data and incorrect reporting in financial statements
• Formal and well-controlled systems development processes are more likely to produce accounting information system applications free from internal control weaknesses
• Strong application controls reduce control risk for auditors, resulting in less substantive testing needed to achieve audit objectives
• Participants in systems development


  • Systems professionals (systems analysts, systems engineers, database designers, programmers)
  • End users (managers, operations personnel, accountants)
  • Stakeholders (internal steering committee, internal auditors, external auditors)
• Systems professionals


  Responsible for building the system by gathering facts about current system problems, analyzing them, and formulating solutions
• End users


  Individuals for whom the system is built, who collaborate with systems professionals to articulate their problems and needs clearly during development
• Stakeholders


  Individuals with an interest in the system, not formal end users, who work with the development team to ensure user needs are met, adequate internal controls are designed, and the development process is properly implemented and controlled
• Ways organizations acquire information systems

  • Develop customized systems in-house through formal systems development activities (IN HOUSE DEVELOPMENT)
  • Purchase commercial systems from software vendors (COMMERCIAL SYSTEM)
• Factors driving growth of commercial software

  • Relatively low cost compared to customized software
  • Emergence of industry-specific vendors targeting specific business needs
  • Increased demand from small businesses lacking in-house development staff
  • Trend toward downsizing and distributed data processing appealing to larger organizations
• Types of commercial software


  • Turnkey systems (completely finished and tested systems ready for implementation)
  • Backbone systems (provide a basic system structure with primary processing modules programmed)
  • Vendor-supported systems (custom systems developed and maintained by the vendor for the client)
• Turnkey systems


  Sold as compiled program modules with limited customization options, including general accounting systems, special-purpose systems, and office automation systems
• Backbone systems


  Offer a range of modules for various business processes, such as enterprise resource planning (ERP), but customizing these systems can be expensive and time-consuming
• Vendor-supported systems


  Custom systems developed and maintained by the vendor for the client, with support levels including application installation, system configuration, data conversion, personnel training, troubleshooting, and maintenance
• Advantages of commercial software

  • Implementation time
  • Cost
  • Reliability
• Disadvantages of commercial software


  • Independence
  • The need for customized systems
  • Maintenance
• Systems Development Life Cycle (SDLC)


  An eight-phase process consisting of two major stages: new systems development and program change procedures (maintenance)

  
• Systems planning (Phase I)


  Links individual system projects to the strategic objectives of the firm, with a systems steering committee responsible for resolving conflicts, reviewing projects, assigning priorities, budgeting funds, and reviewing project status
• Levels of systems planning


  • Strategic systems planning (deals with allocation of systems resources at macro level over three to five years)
  • Project planning (allocates resources to individual applications within the strategic plan framework)
• Project planning


  Involves identifying user needs, preparing proposals, evaluating feasibility, prioritizing projects, and scheduling work, producing formal documents like project proposal and project schedule
• Systems analysis (Phase II)


  Involves surveying the current system to gather and analyze facts, with the goal of assessing the current system and identifying its problems and user needs
• Disadvantages of surveying the current system


  • Current physical tar pit (analysts may get bogged down in the task)
  • Thinking inside the box (surveying the old system may limit new ideas)
• Advantages of surveying the current system


  • Identifying what to keep (helps identify functionally sound elements to preserve or modify)
  • Forcing understanding (helps analysts fully understand the system)
  • Isolating root problems (helps conclusively determine the cause of reported problems)
• Classes of system facts gathered

  • Data sources
  • Users
  • Data stores
  • Processes
  • Data flows
  • Controls
  • Transaction volumes
  • Error rates
  • Resource costs
  • Bottlenecks and redundant operations
• Fact-gathering techniques


  • Observation
  • Task participation
  • Personal interviews (open-ended questions, questionnaires)
  • Reviewing key documents (organizational charts, accounting records, transaction listings, system flowcharts, mission statements, financial statements)
• Systems analysis report


  Presents to management or the steering committee the survey findings, the problems identified with the current system, the user's needs, and the requirements of the new system
• Conceptual systems design (Phase III)


  Produces multiple conceptual systems meeting identified system requirements from systems analysis, with users evaluating and selecting the most plausible and appealing alternatives
• Approaches to conceptual systems design


  • Structured approach (develops each new system from scratch from top down)
  • Object-oriented approach (builds systems from bottom up by assembling reusable modules)
• Structured design approach


  Disciplined approach to designing systems from top down, utilizing data flow diagrams (DFDs) and structure diagrams to depict top-down decomposition
• Object-oriented approach

  Builds information systems from reusable standard components or objects, with the central concept of reusability to reduce time, cost, and effort for development, maintenance, and testing
• System evaluation and selection (Phase IV)


  The procedure for selecting the one system from the set of alternative conceptual designs that will go to the detailed design phase, an optimization process to identify the best system
• Building automobiles


  • New models are constructed from standard components
• Standard components


  Components like engine, gearbox, alternator, etc. that are shared across multiple car models
• Reusability


  Central concept in object-oriented approach
• Standard modules


  Created once can be used in other systems with similar needs
• Creation of library of reusable modules

  • Reduces time, cost, and effort for development, maintenance, and testing
  • Improves user support and flexibility in development process
• System Evaluation and Selection—Phase IV


  1. Perform a detailed feasibility study

  2. Perform a cost–benefit analysis
• Technical Feasibility


  Concerned with whether system can be developed using existing technology or if new technology is needed
• Economic Feasibility


  Pertains to availability of funds to complete project