An auditor is testing the 'Cutoff' assertion for sales. Which procedure 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 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

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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