Systems Development and Program Change Activities
THE SYSTEMS DEVELOPMENTS PROCESS
- constitutes a set of activities by which organizations obtain IT-based information systems.
- These activities are of interest to auditors in their conduct of a financial statement audit for two reasons.
First, the creation of an entity-wide information system involves significant financial transactions.
The second and often the more pressing concern for auditors has to do with the actual products that emerge
from the systems development process.
The quality of accounting information presented in an organization’s financial statements is directly related to the
quality of the accounting information systems. A materially flawed financial application can corrupt financial data,
which may then be incorrectly reported in financial statements. Systems development processes that are formal and
well-controlled are more likely to produce AIS applications that are free from internal control weaknesses than those
that are informal and poorly controlled.
- In this first major section of the chapter, we examine the key activities that constitute a formal systems
development process.
Participants in Systems Development
- classified into three broad groups:
1. Systems professionals
- These individuals actually build the system. They gather facts about problems with the current
system, analyze these facts, and formulate a solution to solve the problems. The product of their efforts
is a new information system. Examples are systems analysts, systems engineers, database designers,
and programmers.
2. End users
- those for whom the system is built. These include managers and operations personnel from various
functional areas including accountants.
- participates in SYS DEV: During systems development, systems professionals work with the primary
users to obtain an understanding of the users’ problems and a clear statement of their needs.
3. Stakeholders
- are individuals who have an interest in the system but are not formal end users. These include the
internal steering committee that oversees systems development, internal auditors including IT auditors
and external auditors acting as consultants or serving in the role of internal auditor.
- participates in SYS DEV: Stakeholders work with the development team to ensure that users’ needs
are met, that adequate internal controls are designed into the information systems under construction,
and that the systems development process itself is properly implemented and controlled.
INFORMATION SYSTEMS ACQUISITION
- valuable asset to have a responsive, user-oriented information system because it increases productivity,
reduces inventories, eliminates non-value-added activities, enhances customer service, improves
management decisions, and coordinates activities throughout the organization.
- HOW TO ACQUIRE INFORMATION SYSTEMS? 2 ways
1. Organizations develop customized systems in-house through formal systems development activities or
2. They purchase commercial systems from software vendors.
In-house development - requires maintaining a full-time systems staff of analysts and programmers who
identify user information needs and create custom systems.
Commercial systems – popular option is to purchase commercial systems from software vendors.
Management is thus confronted with many competing packages, some with features in common and others
with unique features and attributes that they must choose between.
HOW TO MAKE THE RIGHT CHOICE?
- Understand the trends in commercial software. Do it step by step.
- Four factors contributing to the growth of the commercial software market: more popular, why?
PARANG DAMIT
1. relatively low cost of general commercial software as compared to customized software;
2. the emergence of industry-specific vendors who target their software to the needs of particular
types of businesses.
3. a growing demand from businesses that are too small to afford in-house systems’ development
staff;
4. the trend toward downsizing organizational units and the move toward distributed data processing
has made the commercial software option appealing to larger organizations.
- WHAT CONSISTS OF THE COMMERCIAL SOFTWARE PACKAGES?
1. Turnkey systems
2. Backbone systems
3. Vendor-supported systems
1. Turnkey systems - are completely finished and tested systems that are ready for implementation. These are
often general-purpose systems or systems customized to a specific industry. Examples of turnkey systems
are:
a. General Accounting Systems - designed to serve a wide variety of user needs.
- To provide flexibility, general accounting systems are designed in modules. This allows users to
purchase modules that meet their specific needs.
- Typical modules include accounts payable, accounts receivable, payroll processing, inventory
control, general ledger, financial reporting, and fixed asset.
b. Special-Purpose Systems - Target selected segments of the economy.
- medical field, the banking industry, and government agencies have unique accounting
procedures, rules, and conventions that general-purpose accounting systems do not always
accommodate.
c. Office Automation Systems - computer systems that improve the productivity of office workers.
- include word processing packages, database management systems, spreadsheet programs, and
desktop publishing systems.
2. Backbone systems - provide a basic system structure on which to build. The vendor designs and programs
the user interface to suit the client’s needs. By selecting the appropriate modules, the customer can create a
highly customized system. Customizing a commercial system, however, can be expensive and time-
consuming.
- Why its called A compromise between a custom system and a turnkey system.
3. Vendor-supported systems - custom systems that the vendor develops and maintains for the client
organization. Different support levels are possible under this model including:
* Application installation, system configuration, data conversion, personnel training, and troubleshooting
and maintenance.
* Database support involves developing and maintaining the database tables for the application.
* Configuring the server and operating system to host the application and database.
* Interfacing the vendor-supported application to other in-house supported systems where data sharing
between systems is necessary.
* Backup and recovery of programs and data as part of an organization’s disaster
recovery plan.
- WHAT ARE THE ADVANTAGES OF COMMERCIAL SOFTWARE?
A. Implementation Time – Custom systems through in-house procedures often take a long time to
develop. Commercial software can be implemented almost immediately once a need is recognized. The
user does not have to wait.
B. Cost – A single user must wholly absorb in-house development costs. Since the cost of commercial
software is spread across many users, the unit cost is reduced to a fraction of the cost of an in-house
developed system.
C. Reliability – Although no system is certified as being free from errors, commercial software is less
likely to have errors than an equivalent in-house system. Most reputable commercial software
packages are thoroughly tested before their release to the consumer market.
- WHAT ARE THE DISADVANTAGES OF COMMERCIAL SOFTWARE?
A. Independence – This is perhaps the greatest disadvantage of vendor-supported systems. Purchasing a
vendor-supported system makes the firm dependent on the vendor for maintenance.
B. The need for customized systems - The prime advantage of in-house development is the ability to
produce applications to exact specifications. This advantage also describes a disadvantage of
commercial software (for being too general or inflexible)
C. Maintenance - Business information systems undergo frequent changes. If the user’s needs change, it
may be difficult or even impossible to modify commercial software. In-house development, however,
provides users with proprietary applications that can be economically maintained.
