Chapter 2:

Introduction to
Transaction Processing
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Continuation…
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 Digital Audit Trail
- Audit trail is a system that traces the detailed transactions relating to any item
in an accounting record.
- Tracing can be done using paper or electronically based (DIGITAL)
- In theory, it functions the same as thec manual audit trail.
- It is used to allow auditors to more easily trace transactions to their effects on
financial statements.
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 DATA FLOW DIAGRAM (DFD)
- It is uses symbols to represent the entities, processes, data flows, and data
stores that pertain to a system.
- Entities in DFD are external objects at the boundary of the system being
modeled. c
- DFDs make it easy to depict the business requirements of applications by
representing the sequence of process steps and flow of information using a
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graphical representation or visual representation rather than a textual

description.
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 Entity Relationship
Diagrams
An entity relationship (ER) diagram is a
documentation technique used to represent the
relationship between entities. Entities are
physical resources (automobiles, cash, or
inventory), events (ordering, inventory,
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receiving cash, shipping goods), and agents

(salesperson, customer, or vendor) about which
the organization wishes to capture data. One
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common use for ER diagrams is to model an

organization's database.
 Relationship between ER Diagrams and
Data Flow Diagrams
DFDs and ER diagrams depict different aspects of the same system, but they are
related and can be reconciled. A DFD is ca model of system processes, and the ER
diagram models the data used in or affected by the system. The two diagrams are
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related through data; each data store in the DFD represents a corresponding data
entity in the ER diagram.
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 System Flowcharts
- Graphical representation of the physical relationship among key elements of a system
- Shows the flow of data and how decision can affects the events surrounding it
- Explains the functionality of an entire system

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● The flowcharting examples in the following section illustrates techniques for
representing both manual and computer-based accounting process.
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● We begin by documenting manual procedures. We will add computer elements to the

system later.
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 Flowcharting Manual Activities
- To demonstrate the flowcharting of manual activities let's assume that an auditor needs to
flowchart a sales order system to evaluate its internal control and procedures.
- The auditor will begin by interviewing individuals involved in the sales order process to
determine what they do. This information will be captured in a set of written facts similar to
those below:
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1. A clerk in the sales department receives a hard copy customer order by mail and manually
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prepares four hard copies of a sale order

2. The clerk sends copy 1 of the sales order to the credit department for approval. The other three
copies and the original customer order are filed temporarily, pending credit approval
3. The credit department clerk validates the customers order against hard copy credit records kept in
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the credit department. The clerk signs copy 1 to signify approval and returns it to the sales clerk.
 Flowcharting Manual Activities
4. When the sales clerk receives credit approval he or she files copy 1 and the customer
order in the department. The clerk sends copy 2 to the warehouse and copies 3 and 4 to
the shipping department.
5. The warehouse clerks picks the products from the shelves, records the transfer in the
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hard copy stock records, and sends the products and copy 2 to the shipping department.
6. The shipping department receives copy 2 and the goods from the warehouse, attaches
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copy 2 as a packaging slip, and ships the goods to the customer. Finally, the clerk files
copies 3 and 4 in the shipping department
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 Certain rules and conventions need to be observed:
1. The flowchart should be labeled to clearly identify the system that it represents
2. The correct symbols should be used to represent the various entities in the system
3. All symbols on the flowchart should be labeled
4. Lines should have arrowheads to clearly show the process flow and sequence of
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events
5. If complex processes need additional explanation for charity, a text description should
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be included on the flowchart or in an attached document referenced by the flowchart.

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 LAY OUT THE PHYSICAL
AREAS OF ACTIVITY
(Manual)
Flowchart reflects the physical system, which is
represented as vertical columns of events and
actions separated by lines of demarcation. Generally,
each of these areas of activity is a separate column
with a heading. From the written system facts, we
see that there are four distinct areas of activity:
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• Sales Department

• Credit Department
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• Warehouse

• Shipping Department
 TRANSCRIBE THE WRITTEN FACTS INTO VISUAL
FORMAT

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 TRANSCRIBE THE WRITTEN
FACTS INTO VISUAL FORMAT

1. A clerk in the sales department receives a

hard-copy customer order by mail and manually
prepares four hard copies of a sales order.
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 TRANSCRIBE THE WRITTEN
FACTS INTO VISUAL FORMAT

2. The clerk sends Copy 1 of the sales order to

the credit department for approval. The other
three copies and the original customer order are
filed temporarily, pending credit approval.

3.The credit department clerk validates the

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customer’s order against hard-copy credit

records kept in the credit department. The clerk
signs Copy 1 to signify approval and returns it
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to the sales clerk.

 TRANSCRIBE THE WRITTEN
FACTS INTO VISUAL FORMAT
4. When the sales clerk receives credit approval, he or she
files Copy 1 and the customer order in the department. The
clerk sends Copy 2 to the warehouse and Copies 3 and 4 to
the shipping department.

5. The warehouse clerk picks the products from the shelves,

records the transfer in the hard-copy stock records, and
sends the products and Copy 2 to the shipping department.
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6. The shipping department receives Copy 2 and the goods

from the warehouse, attaches Copy 2 as a packing slip, and
ships the goods to the customer. Finally, the clerk files
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Copies 3 and 4 in the shipping department.

 Batch Processing
• Batch processing permits the efficient management of
a large volume of transactions. Both of these advantages have implications for
• A batch is a group of similar transactions (such as sales designing batch systems.
orders) that are accumulated over time and then 1. First is that economies are derived by making
processed together. transaction batches large as possible. The average
c transaction cost is thus reduced when the
Batch processing offers two general advantages. processing fixed cost associated with the batch is
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 First, organizations improve operational efficiency by
grouping together large numbers of transactions into
batches and processing them as a unit of work rather
than processing each event separately.
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allocated across a large number of transactions.
2. Second implication is that finding an error in a
very large batch may prove difficult.

 Second, batch processing provides control over the

transaction process.
 PHYSICAL AREAS OF ACTIVITIES:
1. Sales Department- engage in variety of activities with the objective to promote the customer
purchase of a product or client engagement of service.
2. Credit Department- engage of lending money and has a major role in the banking system.
3. Warehouse- room for the storage of merchandise or commodities.
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4. Shipping Department- responsible for the efficient and safe delivery of products to customers.
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 Program Flowchart
Program flowchart is a type of flowchart
that explains how a particular program
solves a given task. The program flowchart
is a data flow that shows the data flow
while writing a program or algorithm. It c
allows the user to explain the process
quickly as they collaborate with others.
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These programming flowcharts also

analyze the logic behind the program to
process the code of the programming.
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 System flowcharts are the diagram type that
shows you the flow of data and how
decisions can affect the events surrounding
it. Like other types of flowcharts, system
flowcharts consist of start/end terminals,
processes, and decisions, all connected by c
arrows showing the flow and how data
moves in the flow.
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 Difference between Program Flowchart and System
Flowchart
System flowchart is a type of flowchart that explains the functionality of an
entire system. In contrast, a program flowchart is a type of flowchart that
explains how a particular program solves a given task. Thus, this is the basic
difference between system flowchart andc program flowchart.
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 Record Layout Diagrams
Record Layout Diagrams are used to reveal the internal structure of the records
that constitute a file or database table. The layout diagram usually shows the
name, data type, and length of each attribute.
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Thank you!
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