Chapter 8

System Implementation and Operation

Learning Objectives

To discover which activities take place during the third and fourth phases of the SDLC.

To know how auditors participate in system implementation

To understand how to do a post-implementation review

To learn how to properly account for the costs of an accounting information system

SDLC

Systems Master Plan

SystemsAnalysis

SystemDesign

SystemImplementation

SystemOperation

System Implementation Phase

Period of time during which a working system is produced and placed in operation.

Begins with acceptance of design Ends with acceptance of the system by

the user

Activities during Implementation

Equipment Installation Programming Training Testing Conversion

Equipment Installation

Site Preparation» Trivial for Micro-computers» More involved for mainframes

– water cooling– air conditioning– cabling– fire proofing

Acceptance tests

Programming Develop Program Logic

» Modular» Structured programming

– only one entry and one exit point– sequence, selection, iteration constructs (No gotos)

Code the Program» Top down coding» Internal documentation

Debug the Program» Structured Walkthrough» Test the Program

Document the Program

Training User training

» Procedures manual– managers– supervisors– clerks

Operations training» Operations manual

– Data entry clerks– Computer operators– Technical support personnel– Data control clerks

Testing

String Testing» Programs may run in series, with output of

one program becoming input to another program. String testing is performed to test if the entire series of programs works properly.

System Testing» Test of computer and manual procedures.

Conversion

File conversion Volume Testing

» to test how well the system works under an actual processing load.

System Changeover» Direct Changeover» Pilot System» Parallel Operation» Phase-In

Auditor Involvement

During System Testing» review adequacy of test data» review test results

During Conversion» review conversion plan prior to conversion» review accuracy of new data files

System Operations Phase

Period of time during which the system functions as a provider of accounting information.

Activities during Operations

Post-Implementation Review System Maintenance Accounting for systems costs

Post-Implementation Review

An analysis and appraisal of a new system a few months after conversion.

Performed by a review team» Includes systems analysts involved» Includes Internal auditor (impartial)

Focus on appraisal, not learning the design of the system

Procedures During Post Implementation Review

Estimate Costs and Benefits Evaluate Adequacy of Documentation Evaluate User Satisfaction Evaluate Effectiveness of Internal

Controls

Reasons for Post-Implementation Review

Provides information for future projects Prompt correction of shortcomings Motivation for good design Opportunity to evaluate project team

members

System Maintenance

Equipment Maintenance Software Maintenance

» Planned System Improvements» Unplanned Changes

Accounting for Systems Cost

Development Costs Operating Costs

How to handle Development Costs ?

Allocate to user department proposing the system» Provides incentive to limit development costs» Provides incentive to avoid unprofitable systems» May prevent development of beneficial systems

Include in General Overhead» Recognizes the system’s benefits to entire

organization» Provides little user department incentive to limit

development costs.

How to handle Operational Costs ?

Allocate to user departments using a charging algorithm

Basis of Allocations Cost-Based Rates

» All MIS expenditures borne by those departments consuming MIS services

» Allocated costs are uncontrollable in user departments

Market Rates» Allocated costs are objectively determined» Provides incentive to limit MIS expenditures» A market rate for equivalent services may not exist

Standard Rates» Provides recovery of MIS expenditures over long term» Provides incentive to limit MIS expenditures» May be difficult to set