Final answer:
The correct answer is option true. The Public Company Accounting Oversight Board (PCAOB) encourages auditors to start from the bottom of financial transaction records to identify key controls.
Step-by-step explanation:
The Public Company Accounting Oversight Board (PCAOB) does encourage auditors to start from the bottom of financial transaction records to identify the key controls. This approach, known as the bottom-up approach, ensures that auditors have a comprehensive understanding of the transactions and related controls before assessing the overall financial statements.
By starting from the basic/bottom of the financial transaction records, auditors can trace the transactions through the system, identify any weaknesses or gaps in the controls, and assess the impact on the financial statements. This process helps auditors in performing a thorough and reliable audit.
For example, auditors may start by examining individual sales transactions and their corresponding documentation, such as invoices, receipts, and purchase orders. They can then assess whether the control measures, such as proper authorization and segregation of duties, are in place and operating effectively.