Flow charts for audit purposes;

              Flow Charts
for
Audit
Pu rposes
by Robert M. Rennie
V
INTRODUCTION
A fundamental requirement for the auditor in express­ing
a competent opinion of the credibility and fairness
of financial statements is that he has sufficient knowledge
— particularly from the point of view of internal control
of the accounting system which produced the informa­tion
used in the statements. It is therefore essential, par­ticularly
because of the continuing nature of most audit
engagements, that this knowledge of the system be re­corded
in such a way as to facilitate future reference
and to highlight any system deficiencies.
The purpose of this article is to illustrate and explain
the use of flow charts as an aid in the determination and
evaluation of a client's accounting system, and as a means
oi recording these findings in an orderly, concise and
comprehensive manner. It should be clearly understood
^ARCH, 1965
that flow charts and their related narratives are only a
part, though an important one, of the information we
must have in our files with respect to a client's account­ing
procedures and internal controls. They are not in­tended
to be an elaborate or detailed system's study; their
prime purpose is to assist the auditor in evaluating the
client's accounting system as a means of producing satis­factory
information for financial statement purposes.
The flow chart techniques used in this outline are not
elaborate. Using six basic symbols, a simple but effective
method is demonstrated of flow charting two major seg­ments
of an accounting system in a medium sized man­ufacturing
company. The accounting procedures which
are illustrated are not intended to be ideal but are used
only as a means of showing how flow charts may be
developed on an audit assignment. The following sections
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