Accounting Systems Design and Development Process

© 2006 Prentice Hall Business Publishing Accounting Information Systems, 10/e Romney/Steinbart 1 of 171
C HAPTER 20
Systems Design,
Implementation, and
Operation

INTRODUCTION
• Accountants must understand the entire systems
development process, since they are involved in
several ways:
– Helping to specify their needs.
– As members of the development team.
– As auditors after the fact.
• Accountants also help and keep the project on
track by:
– Evaluating and measuring benefits.
– Measuring costs.
– Ensuring the project stays on schedule.

INTRODUCTION
• Effective systems analysis and design
can ensure that developers:
–Correctly define the business problem.
–Design the appropriate solution.

INTRODUCTION
• The crucial phases of the SDLC include:
– Systems analysis to define the new systems
requirements (discussed in Chapter 18).
– The phases discussed in this chapter, which
include:
• Conceptual systems design
• Physical systems design
• Systems implementation and conversion
• Operation and maintenance

INTRODUCTION
include:

CONCEPTUAL SYSTEMS DESIGN
• In the conceptual systems design
phase, a general framework is created for
implementing user requirements and
solving the problems identified in the
analysis phase.
• The three main steps are:
– Evaluate design alternatives.
– Prepare design specifications.
– Prepare the conceptual systems design
report.

Systems
Analysis
Prepare
Design
Specifications
Physical
Design
Implementation
And
Conversion
Operation
And
Maintenance
Prepare
Conceptual Systems
Design report
Evaluate
Design
Alternatives
Conceptual
Systems
Design

Systems
Analysis
Prepare
Design
Specifications
Physical
Design
Implementation
And
Conversion
Operation
And
Maintenance
Prepare
Conceptual Systems
Design report
Evaluate
Design
Alternatives

• Evaluating Design Alternatives
– There are many design decisions that must
be made. For example:
• Should a document be hard-copy or sent by mail?
• Should the company use a large centralized
mainframe or some form of distributed processing?
• What form should data entry take, e.g., keyboard,
optical character recognition,?

• Also, there are many ways to approach the
systems development process:
– Packaged software
– In-house development
– End-user development
– Outsourcing
• The company also chooses between:
– Modifying or enhancing existing software
– Replacing existing software
– Reengineering its business processes

Package software
• An application program developed for sale
to the general public. Packaged software
is designed to appeal to a large audience
of users, and although the programs may
be tailored to a user's taste by setting
various preferences, it can never be as
individualized as custom-programmed
software.

In- house developed software
• In-house software is a software that is produced by
a corporate entity for purpose of using it within the
organization. In-house software however may later
become available for commercial use upon sole
discretion of the developing organization. The need
to develop such software may arise depending on
many circumstances which may be non-availability
of the software in the market, potentiality or ability of
the corporation to develop such software or to
customize a software based on the corporate
organization's need.

In-House Developed Software
• Pros:
• The level of customization is perhaps the biggest
benefit of custom software.
• By meeting your exact specifications, you can
cover every aspect of your business without
unnecessary extras.
• It gives you greater control, which is important if
your business has specific needs that your average
commercial product can’t fulfill. Having customized
software should also make the interface more
familiar and easy to use.

.
• Because in-house software is developed by
a team of your choosing, it also gives you
access to knowledgeable support. Rather
than dealing with technicians who may not
understand your unique situation, you can
get support from the individuals who have
developed your software firsthand. They will
understand any subtle nuances and
minimize downtime from technical errors.

• Cons
Your team of in-house developers may lack
the knowledge and expertise to create
sophisticated software capable of handling all
the tasks you require.

• Custom software also tends to lack
scalability, and upgrades can be
troublesome. Because technology is
constantly evolving, you may have difficulty
adapting to new platforms in the future.
Although developed software may work for
well for a while, it could become defunct in a
few years. This can force you to spend more
money on developing new software.

End user development
• End user development occurs when
information users such as managers,
accountants, internal auditors develop their
own application using computer specialists as
advisor.

• Many of these people work on tasks
that rapidly vary on a yearly, monthly, or
even daily basis. Consequently, their
software needs are diverse, complex,
and frequently changing. Professional
software developers cannot directly
meet all of these needs because of their
limited domain knowledge and because
their development processes are too
slow.

Advantages
• May help reduce the hidden backlog
• Knowledge sharing.
• More acceptable to users
• They can update the software when it is
necessary.
• Encourages innovation and creative solutions

Disadvantages
• Duplication or effort and waste of resources
• Greatly increased costs
• Loss of control over data
• Loss of control of quality in both programs
and data
• Can be used to circumvent control processes,
such as the steering committee
• Generally produces narrow, inflexible
systems with short lives

outsourcing
• With the economy driving towards
globalization, many companies are hard
bound to gain a competitive advantage by
cutting their costs, optimizing efficiency, and
great customer service. So how do you go
about doing that in a limited time? If you are
looking for a one-word answer then offshore
development or outsourcing is your gateway
to success. Outsourcing software
development has proven to be a great
success for many companies worldwide.

• Globalization is forcing a lot of company's to
constantly improve their competitive edge.
Outsourcing will reduce your internal costs
while allowing your company to focus on its
core competencies. In a fast moving
technological world, it is unlikely that your
company will be able to design a whole
spectrum of technical software. So it is wise
to outsource some of your functions while
keeping intact your business processes.

• The design team should identify a variety of
design alternatives and evaluate each with
respect to:
– How well it meets organizational and system
objectives
– How well it meets user needs
– Whether it is economically feasible
– Its advantages and disadvantages
• The steering committee evaluates the
alternatives.

Systems
Analysis
Prepare
Design
Specifications
Physical
Design
Implementation
And
Conversion
Operation
And
Maintenance
Prepare
Conceptual Systems
Design report
Evaluate
Design
Alternatives

• Prepare design specifications
–Once a design has been selected, the
project team develops the conceptual
design specifications for the following
elements:
• Output
• Because output is what goes to the user and the
system must be designed to meet user needs, the
output specifications are prepared first.

elements:
• Output
• Data storage
• How will data be stored to produce the desired
outputs?

elements:
• Output
• Data storage
• Input
• What types of data must be entered to produce the
desired outputs?

elements:
• Output
• Data storage
• Input
• Processing procedures and operations
• How will data be processed and in what sequence
to produce the desired outputs?

Systems
Analysis
Prepare
Design
Specifications
Physical
Design
Implementation
And
Conversion
Operation
And
Maintenance
Prepare
Conceptual Systems
Design report
Evaluate
Design
Alternatives

• Prepare the Conceptual Systems
Design Report
– A conceptual systems design report is
prepared at the end of the conceptual design
phase to:
• Guide physical system design activities.
• Communicate how management and user
information needs will be met.
• Help the steering committee assess system
feasibility.

INTRODUCTION
include:

PHYSICAL SYSTEMS DESIGN
• During the physical systems design phase, the
company determines how the conceptual AIS
design is to be implemented.
– The broad, user-oriented requirements of conceptual
design are translated into detailed specifications used
to code and test computer programs.
– Phases include:
• Designing output
• Creating files and databases
• Designing input
• Writing computer programs
• Developing procedures
• Building in controls

Systems
Analysis
Conceptual
Systems
Design
Output
Design
Implementation
And
Conversion
Operation
And
Maintenance
File & DB
Design
Input
Design
Program
Design
Proce-
dures
Design
Controls
Design
Physical
Systems
Design

Systems
Analysis
Conceptual
Systems
Design
Output
Design
Implementation
And
Conversion
Operation
And
Maintenance
File & DB
Design
Input
Design
Program
Design
Proce-
dures
Design
Controls
Design

• Output Design
–The objective of output design is to
determine the nature, format, content,
and timing of printed reports,
documents, and screen displays.
• Requires cooperation between users and
designers.

• Important design considerations include:
– Use of the output
• Who will use it and why?
• When is it needed?
• What decisions will it facilitate?

– Output medium
• Paper
• Screen
• Voice response
• Diskette
• Microfilm
• Other

– Output medium
– Output format • Should select the format that
clearly conveys the most
information.
• Could be:
– Table
– Narrative
– Graphic

– Output medium
– Output format
– Pre-printed • Should paper output be on
preprinted form and/or
turnaround document?

– Output medium
– Output format
– Pre-printed
– Location • Where is the output to be
sent?

– Output medium
– Output format
– Pre-printed
– Location
– Access • Who should be able to
access hard-copy and
screen output?

– Output medium
– Output format
– Pre-printed
– Location
– Access

– Output medium
– Output format
– Pre-printed
– Location
– Access
– Detail
– Timeliness
• How often should the output be produced?

• Outputs usually fit into one of the following
four categories:
– Scheduled reports
• Have pre-specified content and format.
• Are prepared on a regular basis.
• Examples:
– Weekly sales analysis
– Monthly financial statements

four categories:
– Special-purpose analysis reports
• No pre-specified content and format.
• Typically prepared in response to a
management request.
• Example:
– Analysis of impact of a government
mandate on profitability

four categories:
– Triggered exception reports
• Prepared only in response to abnormal
conditions, i.e., the “trigger.”
• Example:
– Cost overruns

four categories:
– Triggered exception reports
– Demand reports
• Prepared only on request.

Systems
Analysis
Conceptual
Systems
Design
Output
Design
Implementation
And
Conversion
Operation
And
Maintenance
File & DB
Design
Input
Design
Program
Design
Proce-
dures
Design
Controls
Design

• File and Database Design
– Various company segments need to store data in
compatible formats so that data can be shared across
units.
– Important file and database design considerations
include:
• Storage medium
• Hard drive
• Disk
• Diskette
• CD
• Tape
• Paper

units.
include:
• Storage medium
• Processing mode
• Manual
• Batch
• Real time

units.
include:
• Storage medium
• Processing mode
• Maintenance • What procedures are needed to
effectively maintain the data?

units.
include:
• Storage medium
• Processing mode
• Maintenance
• Size • How many records and how big are they?
• How fast are they expected to grow?

units.
include:
• Storage medium
• Processing mode
• Maintenance
• Size
• Activity level
• What portion of records are added or
deleted each year?
• What portion needs to be updated?

Systems
Analysis
Conceptual
Systems
Design
Output
Design
Implementation
And
Conversion
Operation
And
Maintenance
File & DB
Design
Input
Design
Program
Design
Proce-
dures
Design
Controls
Design

• Input Design
–Systems designers must identify the
different types of data input and optimal
input methods.

• Considerations in input design include:
– Input medium • Keyboard
• OCR
• MICR
• Voice input

– Input medium
– Input source
• Where do data originate?
– Computer
– Customer
– Remote location

– Input medium
– Input source
– Input format • What format captures the data with
the least effort or cost?
– Source or turnaround document
– Screen
– Source data automation

– Input medium
– Input source
– Input format
– Input type • What is the nature of the data?

– Input medium
– Input source
– Input format
– Input type
– Volume • How much data are to be entered?

– Input medium
– Input source
– Input format
– Input type
– Volume
– Personnel
• What functions and expertise do the data
entry operators have?
• Is additional training necessary?

– Input medium
– Input source
– Input format
– Input type
– Volume
– Personnel
– Frequency • How often is data to be entered?

– Input medium
– Input source
– Input format
– Input type
– Volume
– Personnel
– Frequency
– Cost
 How can costs be minimized without
adversely affecting efficiency and
accuracy?

– Input medium
– Input source
– Input format
– Input type
– Volume
– Personnel
– Frequency
– Cost
– Error detection and correction
• What errors are possible?
• How can they be detected and corrected?

• Designing Computer Screens
– It is more efficient to enter data directly into
the computer than to record it on paper for
subsequent entry.
– Therefore, it’s important to design computer
screens for input as well as output.

Systems
Analysis
Conceptual
Systems
Design
Output
Design
Implementation
And
Conversion
Operation
And
Maintenance
File & DB
Design
Input
Design
Program
Design
Proce-
dures
Design
Controls
Design

• Program Design
– Program development is one of the most time-
consuming activities in the SDLC.
– A structured programming process should be
followed:
• With structured programming, programs should be
subdivided into small, well-defined modules to reduce
complexity and enhance reliability and modifiability.
• Modules should interact with a control module rather than
with each other.
• To facilitate testing and modification, each module should
have only one entry and exit point.

• To improve software quality, organizations
should develop programming standards (rules
for writing programs).
– Contributes to consistency among programs.
– Makes them easier to read and maintain.
• Consider doing structured program walk-
throughs to find incorrect logic, errors,
omissions, or other problems.

Systems
Analysis
Conceptual
Systems
Design
Output
Design
Implementation
And
Conversion
Operation
And
Maintenance
File & DB
Design
Input
Design
Program
Design
Proce-
dures
Design
Controls
Design

• Procedures Design
• Everyone who interacts with the newly designed AIS should
follow procedures that answer the who, what, when, where,
why, and how questions related to all AIS activities.
Procedures should cover:
• Input preparation
• Transaction processing
• Error detection and correction
• Controls
• Reconciliation of balances
• Database access
• Output preparation and distribution
• Computer operator instructions

• Procedures may take the form of:
–System manuals
–User instruction classes
–Training materials
–Online help screens

Systems
Analysis
Conceptual
Systems
Design
Output
Design
Implementation
And
Conversion
Operation
And
Maintenance
File & DB
Design
Input
Design
Program
Design
Proce-
dures
Design
Controls
Design

• Controls Design
– Improperly controlled input, processing, and
database functions produce information of
questionable value.
– Controls must be built into an AIS to ensure
its effectiveness, efficiency, and accuracy.
These controls should:
• Minimize errors
• Detect and correct errors when they do occur
– Accountants play a vital role in this area.

• Important control concerns that must be
addressed include:
– Validity • Are all interactions valid?

addressed include:
– Validity
– Authorization
• Are input, processing, storage, and
output activities authorized by the
appropriate managers?

addressed include:
– Validity
– Authorization
– Accuracy • Is input verified to ensure accuracy?
• What controls ensure that data is not
lost when passing between processing
activities?

addressed include:
– Validity
– Authorization
– Accuracy
– Security
• Is the system protected against:
– Unauthorized physical and logical access to prevent
improper use, alteration, destruction, or disclosure of
information and software?
– Theft of system resources?

addressed include:
– Validity
– Authorization
– Accuracy
– Security
– Numerical control
• Are documents pre-numbered to prevent errors or
intentional misuse and to detect when documents are
missing or stolen?

addressed include:
– Validity
– Authorization
– Accuracy
– Security
– Numerical control
– Availability
• Is the system available as set forth in agreements?
• Can users enter, update, and retrieve data during those
times?

• Physical Systems Design Report
– At the end of the physical design phase, a
physical systems design report is
prepared, summarizing what was
accomplished.
– This report serves as the basis for
management’s decision whether to proceed to
implementation.

INTRODUCTION
include:

SYSTEMS IMPLEMENTATION AND
CONVERSION
• SYSTEMS IMPLEMENTATION
– Systems implementation is the process of
installing hardware and software and
getting the AIS up and running.
– Phases include:
• Developing a plan
• Preparing the site
• Installing and testing hardware and software
• Selecting and training personnel
• Completing documentation
• Testing the system

Systems
Analysis
Conceptual
Systems
Design
Physical
Systems
Design
Operation
And
Maintenance
Prepare site;
Install & test
hardware
Select & Train
Personnel
System
Implementation
And
Conversion
Implementation
Planning
Complete
documentation
Test
system
Conversion

Systems
Analysis
Conceptual
Systems
Design
Physical
Systems
Design
Operation
And
Maintenance
Prepare site;
Install & test
hardware
Select & Train
Personnel
Implementation
Planning
Complete
documentation
Test
system
Conversion

CONVERSION
• Implementation Planning
– An implementation plan consists of:
• Implementation tasks
• Expected completion dates
• Cost estimates
• Specification of the person(s) responsible for each task
– The plan specifies when the project should be
complete and operational.
– The implementation team should identify risk
factors that decrease the likelihood of successful
implementation, and the plan should contain a
strategy for coping with each of the risks.

CONVERSION
• AIS changes may require adjustments to the
company’s organizational structure,
including:
– Creation of new departments.
– Elimination or downsizing of existing
departments.
– Changes even in the data processing department.

Systems
Analysis
Conceptual
Systems
Design
Physical
Systems
Design
Operation
And
Maintenance
Prepare site;
Install & test
hardware
Select & Train
Personnel
Implementation
Planning
Complete
documentation
Test
system
Conversion

CONVERSION
• Site Preparation
– A large computer may require changes such as:
• New electrical outlets
• Data communications facilities
• Raised floors
• Humidity controls
• Special lighting
• Air-conditioning
• Security measures, such as:
– Fire protection
– Emergency power supply
• Space for equipment, storage, and offices

CONVERSION
 Site preparation is a lengthy process and
should begin well ahead of the installation
date.

Systems
Analysis
Conceptual
Systems
Design
Physical
Systems
Design
Operation
And
Maintenance
Prepare site;
Install & test
hardware
Select & Train
Personnel
Implementation
Planning
Complete
documentation
Test
system
Conversion

CONVERSION
• Select and Train Personnel
– Employees can be hired from outside or
transferred internally.
• Hiring within is usually more effective and less
costly, because the employees already understand
the business.
• Transferring displaced employees can enhance
loyalty and morale.
– Companies take training shortcuts because:
• Effective training is time-consuming and
expensive.
• Those who understand the system are maintaining
and upgrading it.

CONVERSION
• When training is insufficient, the company will
not achieve the expected return on investment.
• The hidden cost is that users will turn to their
coworkers who have mastered the system for
help. Results in:
– Less productive coworkers
– Increased costs
• Effective training includes:
– Hardware and software skills
– Orientation to new policies and operations
• The training should be scheduled just before
systems testing and conversion.

CONVERSION
• Types of training include:
– Technical training from vendors
– Self-study manuals
– Computer-aided instruction
– Videotape presentations
– Case studies
– Experimenting with the AIS under the
guidance of experienced users

Systems
Analysis
Conceptual
Systems
Design
Physical
Systems
Design
Operation
And
Maintenance
Prepare site;
Install & test
hardware
Select & Train
Personnel
Implementation
Planning
Complete
documentation
Test
system
Conversion

CONVERSION
• Three types of documentation must be
prepared for new systems:
– Development documentation
• Describes the AIS and includes:
– A system description
– Copies of output, input, file, and database layouts
– Program flowcharts
– Test results
– User acceptance forms

CONVERSION
– Operations documentation
• Includes:
– Operating schedules
– Files and databases accessed
– Equipment, security, and file retention requirements

CONVERSION
– Operations documentation
– User documentation
• Teaches users how to operate the AIS.
• Includes a procedures manual and training materials.

Systems
Analysis
Conceptual
Systems
Design
Physical
Systems
Design
Operation
And
Maintenance
Prepare site;
Install & test
hardware
Select & Train
Personnel
Implementation
Planning
Complete
documentation
Test
system
Conversion

CONVERSION
• Test the System
– Inadequate system testing has contributed to the
failure of systems.
– All of the following should be given a trial run in
realistic circumstances.
• Documents and reports
• User input
• Operating and control procedures
• Processing procedures
• Computer programs
– Should also test:
• Capacity limits
• Backup and recovery procedures

Systems
Analysis
Conceptual
Systems
Design
Physical
Systems
Design
Operation
And
Maintenance
Prepare site;
Install & test
hardware
Select & Train
Personnel
Implementation
Planning
Complete
documentation
Test
system
Conversion

CONVERSION
• Systems Conversion
– Conversion is the process of changing from the old
AIS to the new.
– Many elements must be converted, including:
• Hardware
• Software
• Data files
• Procedures
– The process is complete when the new AIS has
become a routine, ongoing part of the system.

CONVERSION
• Conversion Approaches
– Four conversion approaches are used to
change from an old to a new system:
• Direct conversion
• Parallel conversion
• Phase-in conversion
• Pilot conversion

CONVERSION

CONVERSION
– Immediately terminates the old AIS when the
new one is introduced.
– Appropriate when:
• The old AIS has no value; or
• The new AIS is so different that comparisons
between the two are meaningless.

CONVERSION

CONVERSION
– Operates the old and new systems
simultaneously for a period of time.
– You can process transactions with both
systems, compare output, reconcile
differences, and make corrections to the new
AIS.

CONVERSION
• Main advantage to parallel conversion:
– It protects the company from errors.
• Main disadvantage:
– It is costly and stressful for employees to process all
transactions twice.
• Because companies often experience problems
during conversion, parallel processing has
gained widespread popularity.

CONVERSION

CONVERSION
– Gradually replaces elements of the old AIS with the
new one.
– The new system is often phased in a module at a
time.
– Main Advantage:
• Data processing resources can be acquired over time.
– Disadvantages:
• Costs of creating temporary interfaces between old and new
AIS.
• Time required to make the complete conversion.

CONVERSION

CONVERSION
– Implements a system in just one part of the
organization, e.g., a branch office or a single store.
– When problems with the system are resolved, the
new system could be implemented at the remaining
locations.
– Advantages:
• Localizes conversion problems and allows training in a live
environment.
– Disadvantages:
• Long conversion time.
• Need for interfaces between old and new systems.

Systems
Analysis
Conceptual
Systems
Design
Physical
Design
Implementation
And
Conversion
Operation
And
Maintenance

OPERATIONS AND MAINTENANCE
• The last step in the SDLC is to operate
and maintain the new system.
• A post-implementation review should be
conducted to ensure the new AIS meets
its planned objectives.

• Factors and questions include:
–Goals and objectives
• Does the system help the organization meet its goals,
objectives, and overall mission?

–Satisfaction
• Are users satisfied?
• Do they want changes or improvements?

–Satisfaction
–Benefits • Were the expected benefits achieved?

–Satisfaction
–Benefits
–Costs • Are actual costs in line with expected costs?

–Satisfaction
–Benefits
–Costs
–Reliability
• Has the system failed, and if so, why?

–Satisfaction
–Benefits
–Costs
–Reliability
–Accuracy
• Does the system produce accurate and complete
data?

–Satisfaction
–Benefits
–Costs
–Reliability
–Accuracy
–Timeliness
• Does the system produce timely information?

–Compatibility
 Are hardware, software, data, and procedures
compatible with existing systems?

–Compatibility
–Controls and security
 Are there safeguards against unintentional errors,
fraud, and intrusion?

–Compatibility
–Errors
 Are there adequate error-handling procedures?

–Compatibility
–Errors
–Training
• Are systems personnel and users adequately
trained?

–Compatibility
–Errors
–Training
–Communications
• Is the communications system adequate?

–Compatibility
–Errors
–Training
–Communications
–Organization changes
• Are structural changes that resulted from the system
beneficial or harmful?
• If harmful, how can they be resolved?

–Compatibility
–Errors
–Training
–Communications
–Organization changes
–Documentation
• Is documentation complete and accurate?

• Any problems discovered during the
review should be brought to
management’s attention, and adjustments
should be made.
• When the review is complete, a post-
implementation review report is
prepared.
• User acceptance of that report is the final
activity in systems development.

• Control of the AIS is then passed to the
data processing department.
• But the work is not done.
– About 30% of the work takes place during
development.
– The remaining 70% is spent in maintaining
the system—particularly with respect to
software modifications and updates.

.
• Sunbeam corp., a consumer product company, hired new CEO AL
Dunlap to turn the company around. While turning Scott paper
Company around, Al made such drastic cost cuts that he was
nicknamed chain saw Al.
• At Sunbeam, Al also made drastic cost- cutting moves, many of
which went too far and ended up hurting the company much more
than they helped. His restructuring plan called for eliminating 87% of
the company’s products and half of its 6000 employees. Included in
the cost cutting plan were the information systems staff, as the
systems function was to be outsourced. Al terminated computer
personnel who were making $35000 a year only to discover they
could earn $125000 a year elsewhere. He then had to replace them
with contract workers who had to be paid significantly more than
$35000.
• during the turn around effort, the company decided to modernize its
information system. To minimize costs, sunbeam used a direct
conversion approach. Unfortunately the new systems did not work,
and since there was no backup system, the entire system was down
for months.

.
• The orders were lost.
• Some customers did not receive their shipment.
• Other customers received their orders two or
three times while other received wrong order.
• Due to poor management and lack of an AIS,
the price of sunbeam’s stock plummeted.
• The shareholder lawsuits were filed.

SUMMARY AND CONCLUSIONS
• You’ve learned in more depth about the activities
that take place in the conceptual design phase of
the systems development life cycle (SDLC).
• You’ve also learned about activities that take place
in the physical systems design phase.
• You’ve explored what happens during the systems
implementation and conversion process.
• Finally, you’ve learned about the activities in the
last phase of the systems development life cycle—
the systems operation and maintenance process.

Accounting Systems Design and Development Process

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