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

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 and those made after are not.

To Best Ascertain That a Company Has Properly Included Merchandise