When auditing merchandise inventory at year-end,the auditor performs a purchase cutoff test to obtain evidence that
A)all goods purchased before year-end are received before the physical inventory count.
B)no goods held on consignment for customers are included in the inventory balance.
C)no goods observed during the physical count are pledged or sold.
D)all goods owned at year-end are included in the current period inventory balance.

Question

Quizplus · Accepted Answer

A purchase cutoff test ensures that all transactions for goods that the company owns as of the year-end are recorded in the correct accounting period. This includes ensuring that goods owned at year-end are included in the inventory balance, regardless of whether they have been physically received.

When Auditing Merchandise Inventory at Year-End,the Auditor Performs a Purchase