To BEST ascertain that a company has properly included merchandise that it owns in its ending inventory, the auditor should review and test the:
A) contractual commitments made by the purchasing department.
B) purchase invoices received on or around year-end.
C) purchase cutoff procedures.
D) terms of the open purchase orders.

Question

Quizplus · Accepted Answer

Purchase cutoff procedures ensure that transactions are recorded in the correct accounting period. Testing these helps auditors verify that merchandise owned by the company at year-end is accurately included in the ending inventory, by ensuring that purchases made before year-end are included in inventory and those made after are not.

To BEST Ascertain That a Company Has Properly Included Merchandise