[misoc23]

Which of the following most likely would be detected by an auditor’s review of a client’s sales cutoff?

A. Shipments lacking sales invoices and shipping documents

B. Excessive write-offs of accounts receivable

C. Unrecorded sales at year-end

D. Lapping of year-end accounts receivable

Answer is C, any explanations would help…thank you in advance

[ruggercpa2b]

I found this explanation which was helpful in narrowing down the answers.

Cutoff relates to whether transactions and events have been recorded in the correct accounting period. Audit procedures must ensure that transactions occurring near year-end are recorded in the financial statements in the proper period.

For example, the auditor may want to test proper cutoff of revenue transactions at December 31. This can be done by examining a sample of shipping documents and sales invoices for a few days before and after year-end.

You would be looking for unrecorded transactions.

AUD - 73, 72 retake 7/2/2016
BEC - 8/20/2016
REG - TBD
FAR - TBD

I am so ready for this nightmare to be over. Been at this way too long.

[Skynet]

It has to do with Improper Revenue Recognition.

A company may not want to recognize sales because it results in increases in taxes (Understating Sales).

Or a company may want to recognize current year sales in the following year to make next year's statement look better (Overstating Sales).

[Author]

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