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Auditing & Assurance › Audit Evidence & Procedures

What is cutoff testing and why is it important?

Intermediate

Answer

Cutoff testing checks that transactions are recorded in the correct accounting period—especially around the year-end for revenue, purchases, and inventory. It addresses the cutoff assertion; errors can shift income or expenses between periods, misstating results. Auditors examine documents (shipping, invoices) just before and after period-end.
Real-world example The auditor examines the last few shipments before year-end to ensure sales are recorded in the correct period.

Common follow-ups: Which assertion does cutoff address? | Why focus on transactions near period-end?

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All 18 Audit Evidence & Procedures questions