Final answer:
An auditor's flowchart is a visual representation of the auditor's understanding of an entity's accounting system, showing how transactions are processed and highlighting potential errors or fraud points.
Step-by-step explanation:
A flowchart of an entity's accounting system created by an auditor is a diagrammatic depiction of the auditor's understanding of the system. This encompasses the auditor's comprehension of how transactions flow through the accounting system, starting from their initiation to their recording in the financial statements. The creation of such a flowchart allows the auditor to identify any points within the process where errors or fraud may occur and assess the effectiveness of the controls in place.
It is important to note that while the flowchart may help in identifying areas susceptible to fraud, its primary objective is to document and visualize the auditor's understanding of the accounting system as a whole. This visualization is an integral part of the auditor's assessment of an entity's internal controls over financial reporting, but it does not specifically represent their program for tests of controls, documentation of their study and evaluation of the system, or their understanding of the types of fraud that are probable.