Those who need to review this body of material
should turn to the appendix at this point, where it is presented in detail.
This section examines alternative information technologies used to support revenue
cycle activities. The first of these is a sales order system that employs batch processing and uses sequential files for storing accounting records. This is an example of an early
legacy-type system. This approach characterizes the era of data ownership in which files
were designed exclusively for the use of a single user. Data sharing is difficult, if not impossible,
in this setting and results in a great deal of data redundancy and data obsolescence.
Although archaic, such systems are still used because they continue to add value
for organizations. For years, the anticipation was that legacy systems would be replaced
before the end of the twentieth century to avoid highly publicized Y2K problems. Instead,
many organizations opted to commit significant resources to repair and modify
these systems for the next millennium. Once the investments were made, the pressure
to replace legacy systems was reduced. Odds favor the likelihood that auditors will be
dealing with these technologies for some time to come.
Second, we review the operational features of a cash receipts system that employs
batch processing and uses direct access files. This configuration is found in both modern
systems and late-era legacy systems. The direct access file approach offers operational
advantages over sequential file processing and permits limited data sharing.
The final example depicts a modern real-time sales order and cash receipts system
that uses database technology. Modern systems design embraces reengineering to radically
reshape business processes and workflow. The objective of reengineering is to reduce
business-processing costs by identifying and eliminating non-value-added tasks.
This process involves replacing some traditional procedures with procedures that are innovative
and sometimes very different from those that previously existed.
You should recognize that space limitations prohibit a review of all possible configurations
of processing technologies, techniques, and file structures. The objective, instead,
is to present examples of fundamentally different approaches that are typically
found in practice and examine their control and audit implications.