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What do you understand by Cutoff test in Auditing?

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Question added by Saeed Ur Rehman , Senior Manager Audit & Advisory , Afrasiab Tanveer & Co Chartered Accountants
Date Posted: 2016/09/08
Tamer Elbeshbishy
by Tamer Elbeshbishy , Financial and Administration Manager , Muscat Towers Holding Group

Cut-off   could be for one of the followings;

 

Sales, to ensure that the end-period sales are probably disclosed 

Inventory , to ensure that the end-period items are probably disclosed 

Purchases , to ensure that the end-period purchases are probably disclosed 

 

Thank you

Frank Mwansa
by Frank Mwansa , ACCOUNTING LECTURER , FREELANCER

Thanks for invitation 

Cut-off is the most critical to the accurate recording of transactions. The auditor should consider whether management has instituted adequate cut-off procedures.The procedures intended to ensure that movements into, within and out of inventory are properly identified in the accounting records.

Wilfredo Quito
by Wilfredo Quito , Accounting Manager , DDC LAND INC.

 

First you need to establish whether you have tested the controls over the area you are looking at. So for example if you are doing a sales cutoff you might have done controls testing over the process. If the controls have passed then that gives you a bit more confidence and you don’t have to do a very extensive substantial testing ( test of detail)

 

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