One Method for Testing Cutoff and In-Transit Inventory Is for the Auditor

question 12

True/False

One method for testing cutoff and in-transit inventory is for the auditor to examine shipping documents for a few days before and after year-end and determine whether the inventory records properly reflect the transaction in the correct period.

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Definitions:

Inventory

Raw materials, work-in-process products, and finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale.

Sales Journal

A dedicated financial ledger designed for documenting all credit sales transactions.

Posting

The act of recording financial transactions in the ledger of an accounting system.

Account Numbers

are unique identifiers assigned to specific accounts in an accounting system to track financial transactions.