Boon Lay Trading (Pte) Ltd. is a medium-sized import-export business based in Singapore. As the information systems auditor working on the audit team that is undertaking an audit of Boon Lay, you conclude that you cannot rely on controls over the programming function within Boon Lay. Accordingly, you decide to expand the extent of substantive testing you will undertake to determine whether material errors or irregularities exist in Boon Lay's accounts.

One of the major expense items within Boon Lay's accounts is freight costs. During analytical review work that the audit team has undertaken, freight costs were identified as having grown significantly more than the volume of turnover. During your review work of management controls over the information systems function within Boon Lay, you also noted that significant maintenance work had been undertaken on the application system where freight costs are calculated.

You decide to test a section of code in this application system that undertakes some of the freight cost calculations. The system is written in COBOL, and the program module you are currently examining contains the following code:

Required: Draw a flowgraph representation of the code. Identify a basis set of paths for the module. Calculate McCabe's cyclomatic complexity number to check you have the correct number of paths in the basis set. On the basis of reading the code, comment on any concerns you have about its quality.

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IF FREIGHT-REGION EQUALS "A" OR "B" MOVE RATE (1) TO FREIGHT-COST PERFORM FREIGHT-COST-EXPENSE ELSE IF FREIGHT-REGION EQUALS "C" MOVE RATE (2) TO FREIGHT-COST PERFORM FREIGHT-COST-EXPENSE ELSE IF FREIGHT-REGION EQUALS "D" MOVE RATE (3) TO FREIGHT-COST PERFORM FREIGHT-COST-EXPENSE ELSE MOVE RATE (4) TO FREIGHT-COST ADD 1 TO PENALTY-COST-SHIPMENTS PERFORM FREIGHT-COST-EXPENSE END-IF END-IF END-IF