It is a graphic presentation of each part of the company’s system of internal control. A flow chart is considered to be the most concise way of recording the auditor’s review of the system. It minimizes the amount of narrative explanation and thereachieves a consideration or presentation not possible in any other form. It gives bird’s eye view of the system and the flow of transactions and integration and in documentation, flaws in the system can be easily spotted and improvements can be suggested.
It is also necessary for the auditor to study the significant features of the business carried on the concern; the nature of its activities and various channels of goods and materials as well as cash, both inward and outward; and also a comprehensive study of the entire process of manufacturing, trading and administration. The flow chart facilitates auditor to understand and evaluate the internal controls in the correct perspective.