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Reported by:
INTRODUCTION:
Why Are Accountants &
Auditors Involved with
SDLC?
The creation of an IS entails SIGNIFICANT
FINANCIAL TRANSACTIONS
THE NATURE OF THE PRODUCTS THAT EMERGE
FROM SDLC the quality of accounting information
rests directly on the SDLC activities that produce
accounting information systems. And therefore the
accountants responsibility is to ENSURE that the
system employ PROPER ACCOUNTING
CONVENTIONS & RULES, & PROCESSES
ADEQUATE CONTROLS. (QUALITY OF THE
PROCESS THAT PRODUCES AIS)
How are Accountants
Involved with the SDLC
1. Users
-must specify accounting techniques to be used, internal
control requirements.
2. Members of the development team
-provide advice
3. Auditors
-system must be auditable
System Evaluation &
Selection PHASE 4
Seeks the BEST system
2 steps:
1. Perform a FEASIBILITY STUDY
2. Perform a COST-BENEFIT ANALYSIS
1
ST
STEP: Perform a
Feasibility Study
What is a feasibility study?
-simply is a listing of a detail in all the things you
need to make the business work.

TELOS
Concerned with whether or not
hardware/software can be acquired or
developed to solve the problem
new or existing technology is needed
Determines if the project makes
financial sense
Managements financial commitment to
this project

Determines whether laws or regulations
may prevent or limit a systems
development project
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2
ND
Step: Perform a
Cost-Benefit Analysis
It involves comparing the total expected cost of
each option against the total expected benefits,
to see whether the benefits outweigh the costs,
and by how much.
3 Steps:
1. Identify the
2. Identify the
3. Compare
1
ST
Identify the Costs
2 CATEGORIES:
O NE - TI ME C O S T S
Examples:
1. Hardware Acquisition
2. Site preparation
3. Software Acquisition
4. System Design
5. Programming & Testing
6. Data Conversion
7. Training
"EC URRI NG C OS TS
Examples:
1. Hardware Maintenance
2. Software Maintenance
3. Insurance
4. Supplies
5. Personnel Costs

2
nd
Identify the Benefits
2 Categories
1. Tangible Benefits
2. Intangible Benefits
Tangible Benefits
Examples:
1. Increased Revenues
-Increased Sales within existing market
- Expansion into other markets
2. Cost Reduction
- Labor Reduction
- Reduced Inventories
Intangible Benefits
1. Increased Costumer Satisfaction
2. More Current Information
3. Operational Flexibility
4. Better internal & external communications
3
rd
/Final Step: Compare
Costs & Benefits
2 Most Common Methods Used for Evaluating IS
are:
1. NPV
2. Payback
NPV Method
Is how much your investments worth today
The better investment is the one with higher/
positive investment.
PRODUCT 1 PRODUCT 2
INITIAL COSTS 3000 2000
ANNUAL SAVINGS 1000 700
DESIRED RATE 10% 10%
YEAR PRODUCT 1
CASH FLOW
PRODUCT 2
CASH FLOW
0 -3000 -2000
1 1000 700
2 1000 700
3 1000 700
4 1000 700
5 1000 700
Payback Method
The length of time required to recover the
cost of an investment.
The better investment is the one with the
shorter payback period
COSTS ANNUAL CASH
INFLOWS
PRODUCT 1 100,000 20,000
PRODUCT 2 210,000 30,000
PRODUCT 1 100,000/20,000 = 5 yrs.
PRODUCT 2 210,000/30,000 =7 yrs.
Prepare Systems
Selection Report
-It is a formal document that is consists of a
revised feasibility study, a cost-benefit analysis,
& a list & explanation of intangible benefits for
each alternative design.
On the basis of this report, the STEERING
COMMITTEE will select a single system that will
go forward to the next phase of the SDLC !
DETAILED DESIGN.
The Auditors Role in
Evaluation & Selection
The Primary concern for auditors is that the
ECONOMIC FEASIBILITY of the proposed
system is measured as accurately as possible.

Ensure 5 things:
1. Only escapable costs are used in calculations of
costs savings benefit
2. Reasonable interest rates are used in measuring
present value of cash flows
3. One time & recurring costs are completely &
accurately reported
4. Realistic useful lives are used in comparing
competing projects.
5. Intangible benefits are assigned reasonable
financial values