SDLC

(Systems Development Life Cycle)

• Identify Project
• Initiate and Plan
• Analyze
• Logical Design
• Physical Design
• Implementation
• Maintenance

SDLC Development Activities

Enterprise Data Model/ Enterprise Data Modeling

Model - includes overall range of organizational databases and their general content

- They are built as part of IS planning for organization but NOT meant for Database design

Modeling - you are determining the scope and general contents of your database in this step.

-How are we going to organize the system?

SDLC Development Activities

Conceptual Data Modeling

• Determine user requirements and business rules
• Build ERD diagram
• Populate the Data Repository

SDLC Development Activities

Logical Database Design

• Select database model that you want to use
• Map ERD diagrams
• Normalize data structures
• Specify business rules

SDLC Development Activities

Physical Database Design

• Select DBMS (Database Management Systems) software that you want to use to manage the database
• Select storage devices
• Determine access methods
• Determine distribution of your database
• Specify update strategies

SDLC Development Activities

Implementation

• Code and test your fdatabase
• Complete all documentation
• Install database and convert data

SDLC Development Activities

Maintenance

• Analyze database and applications to ensure information requirements are being met
• Tune database for improved performance
• Fix errors
• Provide data recovery as needed

Most formal database development methodologies are documentation based

Help managers monitor progress/quality of project

Helps communication between team members

Various stages of DB development will not be accepted until documentation is complete

Speeds systems delivery through combination of speedy design, modeling, user/developer teamwork, and automated development tools

Builds complex and critical applications in months instead of years

Requirements Planning - conduct planning workshop

Design - conduct design workshop

Construction - members of team monitor evolution as application is prototyped

Cutover - installation

Poor training/tools

Reluctance to embrace new methods

Idea that speedy delivery means low quality

Mindset that RAD isn't adequate for large-scale systems development

RAD uses minimal planning in favor of rapid prototyping

- Developers evolve the application by running prototypes

Importance of Controls (Internal Controls)

Control = ???

How you are held accountable, your company's ability to monitor you and your actions

Control = Prevent, Detect, Correct

- Computer servers are everywhere, information is available to unprecedented number of workers

- Distributed computer networks are harder to control than centralized mainframes because they make data available to many different users

- Wide area networks are giving customers and suppliers access to each other's systems and data, making confidentiality a major concern

Sarbanes-Oxley Act

Title I, Title II, and 404

2002

- Applies to publicly held companies

-Intended to increase transparency and improve investor confidence

- Created PCAOB (Public Company Accounting Oversight Board) to oversee the auditing profession (Title I)

-Made new rules for auditing and internal control requirements (Title II)

-Section 404 made a basis for the assessment of internal controls

Developed to help companies develop good internal control systems

1. COSO's Internal Control Framework (COSO/ICF)

2. COSO's ERM (Enterprise Risk Management) Framework

3. COBIT

COSO's Framework or ICF

Name the issues associated with it

Widely accepted as authority on internal controls

-Evaluates controls as required by SOX, but issues with it are that:

1. Too narrow of a focus

2. Focuses on controls first and has an inherit bias toward past problems

Developed to achieve goals of ICF but be more forward looking

- ERM takes risk-based (rather than controls-based) approach

-Oriented towards the future (constant change)

-Incorporates ICF but adds 3 new elements:

1. Setting Objectives

2. Identifying events that may affect company's ability to implement strategies/achieve objectives (positive or negative)

3. Develops a response to assessed risk

COBIT Framework

(Control Objectives for Information and Related Technology)

Address control from 3 vantage points:

1. Business Objectives

2. IT Resources

3. IT Processes

Similar to COSO except COBIT is more IT oriented/IT focused

COBIT sets up rules/processes that focus on setting up IT systems that do their job and save money

General Controls - relate to overall information processing environment (Data center/network operations, system software acquisition, access security, application acquisition)

Application Controls - apply to individual appliations, monitor day to day operations (data capture, data validation, processing, output, and errors)

Business activities associated with the transportation, selling, and receipt of payment for goods

Business activities associated with providing goods and services to customers and collecting cash payments for those sales

Selling

Shipping

Collecting Payment - Billing/AR and CASH

Revenue Cycle - Shipping Goods

Picking Ticket

Revenue Cycle - Shipping Goods

Packing Slip

Revenue Cycle - Shipping Goods

Bill of Lading

Is everything correct and complete and valid? Are all of my orders filled correctly?

Have lookups so you can't mistype when making an order

Reasonableness Checks - only allow integer values, no negative numbers, have upper and lower bounds

Selling - Incomplete/inaccurate customer orders, stockouts/carrying costs/markdowns

Shipping - shipping errors (wrong merchandise, wrong quantities, wrong address)

Billing/AR - Failure to bill customers, billing errors, posting errors when updating AR

Cash Collection - Theft of cash

Business activities associated with the purchasing of and payment for goods/supplies/services used by the company

Ordering .... goods/supplies/services

Receiving and Storing ....

Making payment for ....

Expenditure Cycle - Inventory Control Methods

Economic Order Quantity (EOQ)

-Used only when demand is constant

-Only keep inventory on hand to meet current/usual demand

-Minimizes inventory holding and thereby minimizes costs

Expenditure Cycle - Inventory Control Methods

Material Requirements Planning (MRP)

-Software based

-Inventory of materials for production and of products for delivery

-Keep lowest possible levels of materials and products in store

-Plan manufacturing activities for what's coming up

-Relies on accuracy of forecasting

Expenditure Cycle - Inventory Control Methods

Just in Time Inventory System - (JIT)

-Aims to increase revenue by reducing costs associated with holding too much in-process inventory

-Relies on signals from differnt points in production process to tell production when to make the next part

Expenditure Cycle

Purchase Requisition Form

Expenditure Cycle

Purchase Order

Document that formally requests a supplier to sell and delivery products at specified prices

A purchase order is a promise to pay

Expenditure Cycle

2 Major Responsibilities of the Receiving Department

Were received goods ordered?

Are quantity and quality of received goods acceptable?

Expenditure Cycle

Receiving Report

Document that formally receives items

Typically captures item number, description, unit of measure and quantity

Expenditure Cycle

Debit Memo

Expenditure Cycle - Threats

Ordering Goods

- Preventing stockouts and/or excess inventory

-Requesting unnecessary items

Purchasing goods at inflated prices

Purchasing goods of inferior quality

Purchasing from unauthorized suppliers

Expenditure Cycle - Threats

Receiving

-Receiving unordered goods

-Making errors in counting

-Stealing inventory

Expenditure Cycle - Threats

Making Payment

- failing to catch errors in vendor invoices

-paying for goods not received

-failing to take available discounts

-paying the same invoice twice

-recording and posting errors to accounts payable

Product Design - Design products to meet customer needs while minimizing costs

Planning and Scheduling - develop production plan that allows deman to be met exactly

Production Operations - activities involved in the actual manufacture of products

Cost Accounting - 3 principle objectives

Production Cycle - Product Design

Bill of Materials

Lists components needed to manufacture specific final products

Specifies part number, description, and quantity of each component

Production Cycle - Product Design

Operations List

Production Cycle

Role of Accountant in Product Design

Production Cycle - Planning and Scheduling

Manufacturing Resource Planning (MRPII) Planning Method

Balance existing production capacity and raw materials to meet forecasted sales demand

-Must have predictable demand and a long life cycle to use this

Production Cycle - Planning and Scheduling

Just in Time (JIT) Planning Method

Production Cycle - Planning and Scheduling

Master Production Schedule (MPS)

Specifies how much of each product is to be produced during each planning period and when that production should occur

-uses info about customer orders, sales forecasts, and finished goods

Production Cycle - Planning and Scheduling

Production Order

Production Cycle - Planning and Scheduling

Materials Requisition

Production Cycle - Planning and Scheduling

Move Tickets

Subsequent transfers of raw materials throughout the factory

-identifies parts, location, and time of transfer

Production Cycle - Production Operations

Computer-Integrated Manufacturing (CIM)

Production Cycle

3 Principle Objectives of Cost Accounting

1. Provide info for planning, controlling, and evaluating performance of production operations

2. Provide info for accurate cost data about products for use in pricing and product mix decisions

3. Collect/process information used to calculate inventory and Cost of Goods Sold

Production Cycle - Cost Accounting

Job-Order Costing

Assigns costs to specific production batches or jobs

Used when product/service being sold consists of discretely indentifiable items

Production Cycle - Cost Accounting

Process Costing

Threats to Production Cycle

Product Design

Threats to Production Cycle

Planning and Scheduling

Over or underproduction

Suboptimal investment in fixed assets

Threats to Production Cycle

Production Operations

Threats to Production Cycle

Cost Accounting

HR/Payroll Cycle

5 Sources of Input

1. HRM Department

2. Employees

3. Various Departments

4. Government Agencies

5. Insurance Companies

CHECKS

1. Paychecks - received by each individual employee

2. Payroll Check - sent to bank to authorize transfer of funds from company's regular account to its payroll account

Update Payroll master file

Update tax rates and deductions

Validate time and attendance data

Prepare payroll

Distribute payroll

Calculate employer-paid benefits and taxes

Disburse payroll taxes and miscellaneous deductions

HR/Payroll Cycle

2 Main Types of Payroll Deductions

1. Payroll Tax Withholdings

2. Voluntary Deductions

HR/Payroll Cycle

Earnings Statement

A report listing amount of gross pay, deductions, and net pay for the current period

Also lists YTD totals for each of these categories

-Usually accompanies an employee's paycheck

HR/Payroll Cycle

Payroll Register

HR/Payroll Cycle

Deduction Register

A report listing the miscellaneous voluntary deductions for each employee

-Sometimes accompanies the Payroll Register

HR/Payroll Cycle

Why should payroll not be paid through a company's regular bank account?

For control purposes

Creating a seperate account for payroll limits a company's loss exposure and makes it easier to reconcile payroll and detect paycheck forgeries

HR/Payroll Cycle - Outsourcing

Payroll Service Bureau

HR/Payroll Cycle - Outsourcing

Professional Employer Organizations (PEOs)

Peform services of a Payroll Service Bureau, plus administer and design employee benefit plans

-PEOs generally more expensive than Payroll Service Bureaus

HR/Payroll Cycle - Threats

Employment Practices

-Hiring unqualified or larcenous employees

-Violation of employment law

-Unauthorized changes to payroll master file

HR/Payroll Cycle - Threats

Payroll Processing

-Inaccurate time data

-Inaccurate processing of payroll

-Theft or fraudulent distribution of paychecks