A procedure to test for a cash receipts cutoff error is:
A)reconciling the bank statement.
B)performing a four-column proof-of-cash.
C)observing the counting of cash at the balance sheet date.
D)tracing recorded cash receipts to bank deposits on the bank statement of a different period.

Question

Quizplus · Accepted Answer

Tracing recorded cash receipts to bank deposits on the bank statement of a different period will reveal any cash receipts that were recorded in the wrong period, and therefore cutoff incorrectly. By comparing the recorded cash receipts to the deposits on the bank statement, any timing differences can be identified and investigated further to determine if there is a cutoff error. Reconciling the bank statement, performing a four-column proof-of-cash, and observing the counting of cash at the balance sheet date are all useful procedures, but they do not specifically test for a cash receipts cutoff error.

A Procedure to Test for a Cash Receipts Cutoff Error