To Determine Whether Sales Transactions Have Been Recorded in the Proper

question 10

Multiple Choice

To determine whether sales transactions have been recorded in the proper accounting period, the auditor performs cutoff tests. Which of the following best describes the overall approach used when performing cutoff tests?

• A)Ascertain that management has included in the representation letter a statement that transactions have been accounted for in the proper accounting period.
• B)Analyze transactions occurring within a few days before and after year-end.
• C)Confirm year-end transactions with regular customers.
• D)Examine cash receipts in the subsequent period.

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Definitions:

Operating Activities

Component of cash flow statement that reflects the cash generated or spent on a company's main business operations.

Minimum Lease Payments

The lowest total amount that a lessee is expected to pay over the lease term under a lease agreement.

Executory Costs

Expenses associated with executing a contract, including maintenance and insurance, but excluding depreciation.

Guarantee

A formal promise or assurance, typically in writing, that certain conditions will be fulfilled, especially regarding the quality, durability, or performance of a product or service.