An auditor is testing the 'Cutoff' assertion for sales. Which of the following procedures is MOST appropriate?

Answer options:

Confirm year-end accounts receivable.

Compare a sample of sales invoices from the last few days of the current year and the first few days of the next year to shipping documents.

Review sales returns after year-end.

Trace shipping documents to the sales journal for the entire year.

How to approach this question

Cutoff = Before and After. Look for the procedure that checks the 'boundary'.

Full Answer

B.Compare a sample of sales invoices from the last few days of the current year and the first few days of the next year to shipping documents.✓ Correct

Compare a sample of sales invoices from the last few days of the current year and the first few days of the next year to shipping documents.

Cutoff tests focus on the period immediately surrounding the balance sheet date to ensure transactions are recorded in the proper period.

Common mistakes

Testing only one side of the cutoff.

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