Significance of "Exists in hierarchy" Check box

I want to know Significance of "Exists in hierarchy" Check box.

If this check box is not ticked i.e. position is not hierarchy and same hierarchy is assigned to standard PO in doc type, will system allow us to approve the PO if all other conditions like approval assignments and approval groups, owner can approve satisfy to approve the PO.

As per my understanding of this is not ticked, system should not allow to approve the PO as person is not there in hierarchy assigned to standard PO but on one instance its allowing and on other its not allowing so which one is correct?