OVERVIEW OF COMPUTERS

Distinguishing Characteristics of a Computer

A computer is an electronic device that stores data and instructions internally, performs tasks based on a
set of instructions stored internally, and is able to modify instructions and data without human
intervention.

Main Types of Computers

Digital computer operates by counting. All quantities, whether they be numbers, letters, or symbols, are
represented as discrete numbers.

Analog computer measures continuous electrical or physical quantities such as voltage, temperature, or
length.

Major Computer Applications

Business data processing is characterized by large volumes of input and output, but with relatively little
computation required.

Scientific computation usually requires considerable computation, but relatively little input and output.

Process control requires the measurement of process variables such as the mix of chemicals or the
thickness of plastic film.

Computer Equipment

Central Processing Unit (CPU). It has three functions: internal storage of data and instructions,
computation, and maintenance of order and control of activity in the CPU.

Secondary Storage. Secondary, or auxiliary, storage provides supplementary storage for data and
instructions not currently required by the CPU.

Input Devices. These are used to read data into primary storage from machine-readable transaction
documents, from secondary storage media, or by direct entry of transactions data. Devices that read
machine-readable documents include magnetic ink character readers that read documents such as
checks, and optical character recognition equipment that is used extensively to read documents such as
utility and phone bills. Devices that read data from secondary to primary storage include magnetic tape
drives and magnetic disk drives.

Output Devices. Output devices write data onto secondary storage (computer-readable) or onto output
media readable by humans or non-computer equipment. Output devices that write data onto secondary
storage include magnetic disk and tape drives.

Input/Output Control Units. These control units are specialized devices to facilitate input and output
operations. Their primary functions are code conversion and buffering.
 Code conversion is the translation of the code of the input medium into a form that is readable
by the CPU.

Buffering is the temporary storage of data to compensate for differences in speed or in the
timing of events between the CPU and the input/output devices.

Input/Output Channel. An input/output channel is a path along which input and output data are
transmitted to and from primary storage. The channel also handles the transfer of data to and from the
input/output device.

Selector channels can only accept data from one device at a time.

Multiplexor channels handle two or more devices simultaneously.

Data Preparation Equipment. Data preparation equipment can transcribe transaction source
documents into a form that is readable by an input device.

How the Computer Operates

Data Representation.

The binary system is a number system that uses only two absolute values, 0 and 1. A 0 and 1 is
known as a binary digit (or bit for short).

Binary Coding Methods. Alpha-numeric data that are input to primary storage, stored in primary
storage, and output from primary storage are generally coded in character code. Many computers
convert the character code of numeric data to an arithmetic code for processing in the arithmetic and
logic unit.

Hexadecimal code is a binary shorthand that facilitates the task of reading binary coded output.

The character code is the set of combinations of 0’s and 1’s that represents numeric, alphabetic,
and special characters. The most common eight-bit character code is the Extended Binary Coded
Decimal Interchange Code (EBCDIC).

Components of the CPU.

The primary storage unit holds the data and instructions currently required in processing.

The control unit directs and coordinates the entire computer system.

The arithmetic and logic unit performs arithmetic computations and logical operations.

OVERVIEW OF BUSINESS DATA PROCESSING

Elements of a Data Processing System

Hardware. The term hardware collectively describes all the equipment necessary to perform the
functions of a data processing system.

Systems Software. Systems software is a set of programs (instructions) that coordinates and controls
the use of the hardware and supports the execution of user programs. Systems software is a collective
term that covers the operating system, utilities, compilers, assemblers, and database management
systems.

Application Software. Application software, or user programs, consists of programs designed to solve
specific data processing needs such as payroll or accounts payable processing.

Procedures. These procedures cover the preparation of data, the operation of the computer, control
over the quality of output, the resolution of errors and equipment malfunctions, and the distribution of
output.

Personnel. The auditor should be familiar with the titles and job responsibilities of such positions as
systems analyst, systems programmer, application programmer, computer operator, and librarian.

Programming Languages, Software, and Documentation

Machine-level languages are written in combinations of 0’s and 1’s.

Assembly-level languages are machine oriented but use symbols but use symbols rather than
binary code to ease the programmer’s job.

Higher-level languages are written to solve particular problems on procedures. Higher-level

languages frequently encountered by the auditor include COmmon Business Oriented Language
(COBOL), FORmula TRANslator (FORTRAN), Programming Language 1 (PL/1), Report Program Generator
(RPG), and Beginners’ Al-purpose Symbolic Instruction Code (BASIC).

Functions in a Data Processing System

Input Function. For the control of errors, it is the most important point in the processing cycle.

Data capture is a manual step that involves preparation of the source or original transaction
documents. In some advanced computer systems, such a point-of-sales (POS) systems, data capture is
an automatic machine function that eliminates the preparing of source documents or keying into a
terminal.

Batch data preparation is an off-line process that assembles, prepares and controls a batch of
one type of transaction prior to entry into the computer.

Data entry is the entry into the computer of the transaction data on the source documents.
Batch input is accomplished by machine reading of data using input equipment. Direct entry is the entry
of individual transactions into the computer via an on-line terminal.

Processing Function.
 Data validation is the testing of data for errors at the time they enter the computer or upon the
commencement of processing.

Calculation is the performance of arithmetic operations on data.

Comparison is the examination of data values using logical testing to determine appropriate
courses of action.

Summarization is the addition or netting of similar or related data items to produce a summary
or net amount.

File updating is the modification of the contents of data files to reflect the results of calculations
and comparisons in transaction processing.

File maintenance is the modification of the contents of data files to reflect changes in
permanent file data, table values, and factors.

Sequencing of transactions is the sorting of transactions into a specified order for processing or
output.

Inquiry is the display or printing of file data in response to a request for information.

Error correction is the correction of rejected transactions, and modification of the file’s contents
to eliminate the effect of transaction and processing errors.

Output Function.

Updated data files in secondary storage represent ledgers.

Visual display output is the transitory representation of file data on the screen of a CRT terminal.

Hardcopy output is printed output that comes in a variety of forms and serves a variety of
purposes. These forms include management and accounting reports, reference reports, error reports,
and transaction documents.

OVERVIEW OF STORAGE CONCEPTS

Data Structures

A field is a set of characters that represents a particular data characteristic or attribute.

A record is a collection of data fields that relate to a specific data object.

A file is a group of records of a particular type.

A data base is a set of master files that is integrated to reduce data redundancy and may be
used by several application programs.
Record Organization

 The record can be identified by one or more keys.

 A record may contain all relevant fields, or it may be divided into master and trailer records.
 The logical content of a record will not always be identical with the physical record. The logical
record may share a unit of physical record (such as a punched card) with other logical records.
 The length of a field or the number of fields in a record can be fixed or variable.

File Organization

Sequential. Sequential organization arranges records in sequence based on a primary key.

Direct. Direct (or random) organization physically stores records wherever it is convenient for easy
storage and retrieval.

Indexed Sequential. Indexed sequential is sequential file organization combined with an index to
provide direct processing or retrieval of individual records.

List Organization. The list organization uses pointers to separate the physical from the logical order of
the file. The logical order of the file is sequential, but the physical organization is direct.