Index number which serves as the unique page number The index system should be

Index number which serves as the unique page number

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Index number  which serves as the unique  page number.  The index system  should  be logical and  easy to follow in moving  through  the work  papers.Cross-referencing  data on a working  paper  that is taken from another working  paper  or that is carried forward  to another  working  paper  should  be cross-referenced  with the index  numbers  of those working  papers.Tick marks  shorthand  symbols indicating the items subjected  to the audit procedures  described  in the tick mark explanations.Signatures and dates  upon  completing  their respective tasks, both the preparer  and  reviewer of a working  paper  should  initial and  date it, establishing  responsibility for  the  work performed  and  the review.Analysis  6-1 (15 minutes)A.What do the terms top-down  audit evidence and  bottom-up audit evidence mean  and  why  are they important  to the auditor?B.What is the resulting impact on audit conclusions of top-down  auditing and  bottom-up auditing?C.In an audit program  for accounts receivable assertions, which substantive tests would  relate to top-down  auditing?  Which substantive tests would  relate to bottom-up auditing?Answers  — Analysis  6-1A.Top-down  audit evidence focuses the auditor’s attention  on obtaining  an understanding  of:  (1) the business and  industry, (2) management’s goals and  objectives, (3) how  management  uses its resources to attain those goals, (4) the organization’s competitive  advantage  in the marketplace, (5) core business processes, and  (6) the earnings and  cash  flow that result.Top-down  audit procedures  provide  evidence about  (1) the client’s strategic business  risks, (2) how  management  is responding  to those risks, and  (3) the viability of the entity.  Auditors compare the performance of the audit client with that of other audit clients in  the same industry  as well as that of other public companies in the industry.  The auditor  combines such information  with knowledge  of the client’s goals, objectives, and  marketplace to develop  expectations regarding  the company’s financial statements.  Top-down  audit procedures  also assist the auditor in diagnosing  audit areas that need  additional attention.Bottom-up audit evidence focuses on directly testing:  (1) transactions, (2) account  balances, and  (3) the systems that record  the transactions and  resulting  account  balances.Bottom-up  evidence usually involves some form of sampling  of individual  transactions,  11
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or sampling  the detail that supports  an account  balance and  evaluating  the fair presentation  of the detail that was accumulated  in the financial statements.
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