Page 79 - DCOM509_ADVANCED_AUDITING

Advanced Auditing

Notes Sometimes, it is necessary to briefly narrate some aspects of flow or control on the flow chart.
Those which could be entered on the chart itself, without making it cumbersome, should be
recorded in the chart.

Example: If the billing section makes the calculation of the sales tax payable by customer,
this is a relevant fact and it can be expressed by entering “S.T. Calculation” alongside the
document. It will not make the chart less intelligible.

But if the requirement for narration is slightly bigger, to effectively supplement the information
on the flow chart, the narration should be given at the bottom of the chart by making the exact
position of the chart needing the narration by an asterisk or some other suitable symbol, which
in turn should be corresponded at the bottom.

Example: On a flow chart on production you may have to narrate how production orders
are initiated. This will be slightly bigger narration and it should be provided at the bottom. The
keying symbol should be placed by the side of the document and the narration at the bottom. It
should, however, be remembered that wherever it is possible to obviate the use of narration, it
should be so done and, when it is unavoidable, necessary use of keyed narration should be
made.
Generally, a questionnaire is also is also enclosed with a flow chart, incorporating questions, the
answers to which are to be looked into from the flow chart. In fact, the questionnaire is a guide
for the study of a control system through flow charts.

Self Assessment

Fill in the blanks:

7. A properly drawn up flow chart can provide a neat visual picture of the whole activities of
the section or department involving flow of ………………….. and activities.
8. For actual drawing of the flow chart, the auditor has to formulate his …………… to reflect
the flow and the connected details.

5.5 Internal Control Questionnaires

A questionnaire usually consists of several separate sections devoted to areas such as purchases,
sales, debtors, creditors, wages etc. However, this poses some practical difficulties. The
questionnaire is to travel from executives and, therefore, it may take a pretty long time to be
filled, also the questions may not be readily intelligible to busy executives and there is a
possibility of the questionnaire being misplaced while travelling from one table to another.
Having regard to these difficulties, it is now almost an accepted practice that the auditor (or his
representative) arranges meetings with the executives concerned and gets the answers filled by
each executive. Sometimes, the auditor himself may be required to fill answers. In such a case, he
should ensure that the concerned executive has initiated the answers as a token of his agreement
therewith.

Notes ‘Basic principles governing an Audit’ issued by the Institute of Chartered Accountants
of India states that the auditor should gain an understanding of the accounting system and
related internal controls and should study and evaluate the operation of those internal
controls upon which he wishes to rely in determining the nature, timing and extent of
other audit procedures.

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