These flags are set based on the result without regard for the operation being performed. You may borrow liberally from the class notes but do not assume the reader of your document is familiar with them. Your design document should be able to stand on its own. C3-C0 are the control lines. A and B are the two 32 bit inputs to be operated on.
R is the result of the requested operation on the inputs.
The Design group is responsible for describing the behavior and interface of each entity required by their design. Therefore, you will need to select your test cases carefully. One testing strategy is to aim to test all of the situations that are likely to produce errors. Test the carry in to each bit. Test the negative, zero and odd flags.