Are narratives, flowcharts and checklists useful for both general controls (company-level controls) and transaction controls?

Expert Solution

Narratives, flowcharts and checklists are important tools for excercising all levels of controls. Flowcharts and narratives define the process whereas checklists ensure comlipliance to the defined processes. Examples of how these are used for general and transaction control are mentioned below:

- A check list is in place for the purpose of inventory valuation in a company. This keeps a tab on the obsolete inventory , the slow moving inventory , inventory which costs the company more and blocks funds. This checklist helps in exercising a general level control on the inventory of the company.

- A flowchart is prepared outlining the accounting flow in the system when an invoice is recorded i.e. the accounts impacted according to the payment terms. A manager while giving approval for a payout can ensure that the journal entries on the voucher are as per the flowchart. This is an example of a transaction level control.

ekkarill92 answered 11 months ago

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