Cut-off testing (1)

Question 1

What is cut-off testing?

Answer 1

A specific audit procedure performed after the inventory count to ensure that all of the company’s transactions have been included in the correct period

Question 2

How is it usually tested?

Answer 2

Obtaining sample of GRNs and GDNs either side of year end and then matching them to purchase/sales invoices to ensure they have been included in correct account balance(s)

Question 3

Purchases cut-off (purchases goods)

Answer 3

All purchases for which goods have been received before the year end must be included in FSs as a liability, expense and closing inventory

Question 4

Purchases cut-off (goods received year end)

Answer 4

Goods received after the eyar end should not be included in FSs

Question 5

Revenue cut-off (revenue warehouse receivables)

Answer 5

Revenue for where the goods have left the warehouse should be included within revenue and trade receivables at year end, but in closing inventories

Question 6

Revenue cut-off (revenue closing inventories)

Answer 6

Revenue made after year end must not be included in FSs but should be included in closing inventories

Question 7

Before year end purchase GRN included in?

Answer 7

Purchases
Payables
Inventories

Question 8

After year end purchase GRN included in?

Answer 8

None

Question 9

Before year end revenue GDN included in?

Answer 9

Revenue
Receivables

Question 10

After year end revenue GDN included in?

Answer 10

inventories