Which procedure best tests cut-off for sales?
Answer and explanation
Correct answer: B. Comparing despatch notes either side of the year end with sales recorded
- Step 1: Cut-off tests whether transactions fall into the right period.
- Step 2: Looking at documents either side of the year end shows whether sales were recorded in the period the goods were despatched.
Answer
Comparing despatch notes either side of the year end with sales recorded.
Why not the others: Random selection from the whole year does not focus on the year-end boundary. Circularisation confirms balances, not the period in which sales were recorded. Agreeing receipts to the cash book tests banking, not the sales cut-off.
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