Final answer:
The direction of audit testing to test for unsupported entries in the ledger should start from the last step of the accounting process.
Step-by-step explanation:
The direction of audit testing to test for unsupported entries in the ledger should start from the last step of the accounting process, which is typically the preparation of financial statements. This is because unsupported entries in the ledger can result in misstatements in the financial statements. By starting from the financial statements and working backwards, auditors can trace the entries made in the financial statements to the supporting documentation and underlying transactions.
For example, if an unsupported expense is recorded in the ledger, the auditor can trace the expense back to the supporting documentation such as invoices or receipts to verify its validity. This ensures that all entries in the ledger are supported by appropriate evidence and reduces the risk of errors or fraud.
Starting from the financial statements and working backwards during the audit testing process helps auditors identify unsupported entries, ensure the accuracy of the financial statements, and maintain the integrity of the financial reporting system.