Fordham's Flowchart Guide

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FLOWCHARTING

by

David R. Fordham CPA, CMA, Ph.D. James Madison University School of Accounting

June 2008

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INTRODUCTION

The term “flowchart” is used to describe a special type of illustration depicting the flow of information, control, or responsibility through a series of processes or steps. By using certain symbols, arranged into columns, connected with arrows and described by labels, a flowchart creator can quickly and easily describe a complex process, allowing a flowchart reader to comprehend relationships between the processes and the movement of data and responsibility between the entities involved in the processing.

The idea of using generic symbols and arrows to illustrate complex business processes may have originated with Gilbreth’s scientific study of methods in the 1920’s. Alfred von Neumann’s study of management and control processes in the 1940’s also made use of illustrations and charts utilizing generic symbols, arrows, and labels. However, modern flowcharting derives its direct parentage from the computer programming field. Pioneered in the 1960’s by large computer organizations like IBM, Control Data, HP, and EDS, and first published as ANSI’s X3.6 standard1, flowcharting was the mainstay of procedural computer software design and programming for first, second, and third-generation programming languages.

Accountants and auditors have adapted the programming symbols and techniques, and now use flowcharts to illustrate all kinds of business information flows. A correctly-drawn flowchart can not only quickly and clearly convey the information’s movement, it can vividly call attention to the loci and nodes of such internal controls as segregation of duties, independent verification, and checks and balances. For this reason, flowcharting is widely accepted as one of the more useful diagnostic tools used during an audit.

For a time in the 1990’s, it appeared that flowcharting might be replaced in this role by more modern techniques such as Data Flow Diagrams (DFD’s) or Semantic Modeling’s Entity-Relationship (E-R) diagramming. Unlike flowcharting, however, these newer (and arguably more elegant) techniques do not enjoy a wide base of business professionals familiar with their symbols, usage, and construction. Hence, with the arrival of Sarbanes-Oxley and its renewed emphasis on internal controls, flowcharting has enjoyed a surprising comeback in popularity among accountants, auditors, and consulting firms. A recent informal survey of audit professionals at the four largest firms and numerous regional firms revealed that creating and reading flowcharts, and diagnosing internal controls from flowchart illustrations, will likely remain essential skills for entry-level accountants and auditors for some time to come.

The writers of textbooks and the creators of training aids have displayed a disappointing propensity for variety in their materials regarding symbol usage and chart construction. Many educators are unaware that flowcharting has been uniformly standardized for more than 20 years by the International Standards Organization (ISO 5807 was published in 1985). This standard should be the benchmark for symbol meaning, usage, construction, and good flowchart practice.

This manual has been prepared to introduce the student to the symbols used in flowcharting, and give some simple examples of usage, along with a few simple guidelines for creating flowcharts applicable to accounting, auditing, and internal control.

1

“Report on Proposed American Standard Flowchart Symbols for Information Processing”, Communications of the ACM, Vol. 6:10 (October 1963), pp. 599-604.

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FLOWCHART SYMBOLS COMMONLY FOUND IN ACCOUNTING AND AUDITING APPLICATIONS

Entity

Terminator

Processing

Manual Operation

Data bases, Data Files, & other Information residing in a computer

Paper Documents

Miscellaneous

Complex Process

Pre-Defined Process

Input- Output

Database or Data Files

Decision

Computer Operation

Electronic Transmission

Data base or

Document

Connectors

On-page Off-page or

Information Flow or Responsibility Flow

Multi-copy Document

Stack of identical

Documents Group of Different Documents

Offline Storage, Filing, or TrashBin

Transmittal Tape

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OBSOLETE SYMBOLS YOU MIGHT ENCOUNTER OCCASIONALLY

Display

Database Screen

or (output only)

Data Files

Event

Tangible Object (inventory, cash/coin, packages, mdse, etc.)

Tape

Manual Input (input only)

or Archives

Extract

Sort

NON-STANDARD SYMBOL YOU MIGHT ENCOUNTER OCCASIONALLY

Stored Data Archived Data Archived Reports etc