The audit of year-end physical inventories should include steps to verify that the client's purchases and sales cutoffs were adequate. The audit steps should be designed to detect whether merchandise included in the physical count at year-end was not recorded as a
A) sale in the current period.
B) sale in the subsequent period.
C) purchase in the current period.
D) purchase return in the subsequent period.

Question

Quizplus · Accepted Answer

The audit steps should be designed to detect whether merchandise included in the physical count at year-end was not recorded as a sale in the current period. This will assure that the purchases and sales cutoffs were adequate. Option B is incorrect because the cutoff for the subsequent period is not relevant for the current year-end audit. Option C and D are also incorrect because they are not directly related to the inventory cutoffs.

The Audit of Year-End Physical Inventories Should Include Steps to Verify