How to create a flowchart

0
 Advantages of using flowchart

• Easy read and understand.

• Help to identify key controls and control
weaknesses, especially lack of segregation of
duties.
• Clearly show the logical and physical elements
of a process.
• Illustrate the relationship among processes
and information that flow between them.

1
 Disadvantages of using flowchart

• Time-consuming.
• Not easy to change when amendment is
necessary.

2
 Step 1: Understand the process

• Understand the process through the following

ways:
• Review policies and procedures
• Interview the process owner and relevant
personnel
• Observe the process physically
• Review the relevant documents

3
 Step 1: Understand the process

• Pay attention to the following areas:

• Which parties are involved in the process.
• What are the responsibilities of each parties in the
process.
• What information is inputted, processed and
outputted in the process.
• How to deal with this information during and
after the process.

4
 Step 2: Document the process

• We use the following “Petty cash expense claim process” as an

example:
• In this process, three parties are involved, i.e. Clerk A,
Manager B, Cashier C.
• Procedure 1: Clerk A completes the “Petty Cash Expense
Claim Form”. The form together with the invoice are
submitted to Manager B for review and approval.
• Procedure 2: Manager B reviews the form and invoice. If it is
ok, Manager B signs on the form. The form and the invoice
are then sent to Cashier C.
• Procedure 3: Cashier C checks whether the form is properly
signed and the expense is paid in accordance with the
company policies. If there is no problem, Cashier C posts the
expense claim into general ledger and pays cash to Clerk A.
5
 Step 2: Document the process

• Common symbols used in flowchart:

Start / End / Filing

External Document /
Manual input
party information flow

Computer Manual Off-page

process process Connector
Connector

Document Multiple Database

documents

6
 Step 2: Document the process
• How to use Filing ?

Example:
We use the following alphabets to represent the type of
filing method:
Sales Invoice
N N = document is filed in numerical order

D
D = document is filed in date order
N

A
A = document is filed in alphabetical order

T
T = Temporary file

7
 Step 2: Document the process
Manual
• How to use process
?

We use this symbol to describe the process which is manually taken, e.g. review, approve, check,
etc.
Please be noted that prepare, update or create an EXCEL Spreadsheet should be considered as a
manual process, not computer process.

Examples: Excel
Application Form spreadsheet

Review and Update

approve

Signed Excel
Application Form spreadsheet

8
 Step 2: Document the process
External party
• How to use or Process
name
?

Example 1: External Party Example 2: Process

Supplier
Invoice

Account
Invoice Payable
Process

Bank Payment
cheque Process

Bank
Supplier cheque

9
 Step 2: Document the process
Computer
• How to use Manual input , process and Database ?

Example 1: Posting process

Update
Posting master file

Master file

Example 2: Generate a report

Generate
Input request report Master file

Report

10
 Step 2: Document the process

• First of all, we draw the frame. Number of columns of the frame is

depended on how many parties the process has.
• In our example above, three parties are involved, so we draw a four-
column frame.
• Don’t forget to write down the process name, who prepare the
flowchart and date of preparation.

11
 Prepared by: ABC
Petty cash expense claim process
Date: DD/MM/YY
Description Clerk A Manager B Cashier C

12
 Step 2: Document the process

• Once the frame is constructed, we can use the

symbols and arrows to indicate the process.
• There are some rules needed to be observed:
• Direction of information / document flow should
be from “Left to right” and “top to bottom”.
• Try to draw the whole process in one page. If not
possible, use “Off-page connector” to connect the
pages.
• For some huge process, break it into several sub-
processes.

13
 Prepared by: ABC
Petty cash expense claim process
Date: DD/MM/YY
Description Clerk A Manager B Cashier C
1. Clerk A completes “Petty
Cash Expense Claim Supplier Invoice
Form” (PCECF). The
form together with the PCECF
invoice are submitted to Invoice
Manager B.

(1)
Prepare
PCECF • Use arrow to show
Cross reference the flow of the invoice
number and the form.

• Write the process

details at • Clerk A complete the
“Description” column. form “Manually”, so
• Don’t forget to put the we use trapezoid
cross reference symbol.
number.
14
 Prepared by: ABC
Petty cash expense claim process
Date: DD/MM/YY
Description Clerk A Manager B Cashier C
1. Clerk A completes “Petty
Cash Expense Claim Supplier Invoice Invoice
Form” (PCECF). The
form together with the signed
PCECF
invoice are submitted to PCECF
Invoice
Manager B.
2. Manager B reviews the
form and invoice. If it is (2)
ok, Manager B signs on (1) Review
the form. Prepare & sign
PCECF PCECF

• Use arrow to show

the flow of the
invoice and the
• Manager B checks form.
• Write the details of and signs the form
procedure 2 at here. “Manually”, so we use
trapezoid again.

15
 Prepared by: ABC
Petty cash expense claim process
Date: DD/MM/YY
Description Clerk A Manager B Cashier C
1. Clerk A completes “Petty
Cash Expense Claim Supplier Invoice Invoice
• Form”
Write(PCECF).
the details
The of
signed (3)
procedure
form 3 at
together with the PCECF Check
invoice are submitted to PCECF
here. Invoice PCECF
Manager B.
2. Manager B reviews the
form and invoice. If it is (2)
ok, Manager B signs on (1) Review General
the form. Prepare & sign Ledger
3. Cashier C checks the PCECF PCECF
authorization of PCECF
and the compliance with Update (4)
the company policies. Posting
4. Cashier C posts the
expense into general
ledger. The form and the (5) Invoice
invoice are then filed in Cash Pay
day order. signed
cash
PCECF
5. Cashier C pays cash to
Clerk A.
• Complete the Cashier’s
D
procedure as follow.

16
 Prepared by: ABC
Petty cash expense claim process
Date: DD/MM/YY
Description Clerk A Manager B Cashier C
1. Clerk A completes “Petty
Cash Expense Claim Supplier Invoice Invoice
Form” (PCECF). The
signed (3)
form together with the PCECF
invoice are submitted to PCECF Check
Invoice PCECF
Manager B.
2. Manager B reviews the
form and invoice. If it is (2)
ok, Manager B signs on (1) Review General
the form. Prepare & sign Ledger
3. Cashier C checks the PCECF PCECF
authorization of PCECF
and the compliance with Update (4)
the company policies. Posting
4. Cashier C posts the
expense into general
ledger. The form and the (5) Invoice
invoice are then filed in Cash Pay
day order. signed
cash
PCECF
5. Cashier C pays cash to
Clerk A.

17
 Step 3: Walkthrough the process

• After drawing the flowchart, conduct

walkthrough test to confirm whether the
flowchart is accurate.

18
 Step 4: Identify key controls and control
weaknesses

• Label the key controls. KC1

• The identified key controls will be tested at a later

stage to ensure they are in place and operating
effectively.
• Label the control weaknesses. CW1

• Consider whether there are compensation controls

to mitigate the risk.
• If no compensation control, report the control
weaknesses.

19
 Prepared by: ABC
Petty cash expense claim process
Date: DD/MM/YY
Description Clerk A Manager B Cashier C
1. Clerk A completes “Petty
Cash Expense Claim Supplier Invoice Invoice
Form” (PCECF). The
signed (3)
form together with the PCECF
invoice are submitted to PCECF Check
Invoice PCECF
Manager B.
2. Manager B reviews the (2) KC2
form and invoice. If it is Review
ok, Manager B signs on (1) General
& Ledger
the form. Prepare
approve
3. Cashier C checks the PCECF CW1
PCECF
authorization of PCECF KC1
and the compliance with Update (4)
the company policies. Posting
4. Cashier C posts the
expense into general
ledger. The form and the (5) Invoice
invoice are then filed in Cash Pay
day order. signed
cash
PCECF
5. Cashier C pays cash to
Clerk A.

20
• Expense is reviewed and
• Expense is checked by the cashier
approved by the manager to
independently before payment to ensure
ensure it is spent for
that it is authorized in accordance with the
business purpose and
company policies. So it is considered as
reasonableness. So it is
considered as a key control. a key control.

• Cashier is
responsible for
the cash custody
as well as
accounting entry
posting. It is lack
of segregation, so
it is considered as
a control
weakness.

21
 The End

Thank you!

22