ExpertHard1 markMultiple Choice
CPA · Question 64 · Area III: Procedures
An auditor is testing the 'Cutoff' assertion for sales. Which procedure is most appropriate?
An auditor is testing the 'Cutoff' assertion for sales. Which procedure is most appropriate?
Answer options:
A.
Confirm year-end accounts receivable.
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.
C.
Review sales returns after year-end.
D.
Trace shipping documents to the sales journal for the entire year.
How to approach this question
Cutoff = Before and After year-end. Look for procedures spanning the year-end date.
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 whether transactions were recorded in the correct period. Comparing shipping dates to invoice dates for the days immediately before and after year-end ensures that sales are recorded when shipped (assuming FOB shipping point).
Common mistakes
Confusing Cutoff with general Completeness.
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