Which audit procedure would the auditor use to test for the cutoff balance-related audit objective?
A) Review minutes of the board of directors' meetings.
B) Review the accounts receivable trial balance for large items.
C) Use audit software to foot and cross-foot the aged trial balance.
D) Select the last 20 sales transaction from the current year's sales journal and the first 20 from the subsequent year's and trace each to the related shipping documents.

Question

Quizplus · Accepted Answer

To test for the cutoff balance-related audit objective, the auditor needs to verify that transactions recorded in the current period are properly included, and those recorded in the subsequent period are not included in the current period's financial statements. One way to test this is to select a sample of sales transactions from the end of the current year and the beginning of the subsequent year and trace them to the related shipping documents. This will ensure that the sales are recorded in the correct period, and the cutoff balance is accurate. Therefore, choice D is the most appropriate option. A is not relevant to the cutoff balance objective. B is related to the existence objective, and C is related to the accuracy objective, making them both inappropriate options.

Which Audit Procedure Would the Auditor Use to Test for the Cutoff