From what I can tell, you are asking whether or not the daemon will recursively drill down through the hierarchy of the directory (or directories) designated in the configuration file.
The answer is, yes, it will. Provided the files all end in an extension which declared in the same configuration file and the files themselves are not corrupt in some manner, the daemon will recursively search the designated hierarchy. The amount of time required is related to the number of files, but it has never taken more than a couple of minutes at most for me.
Herman