•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
or sampling the detail that supports an account balance and evaluating the fair presentation of the detail that was accumulated in the financial statements.
- Fall '13
- Amadeus IT Group, financial statements