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) 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 verify that inventory ownership is accurately reflected in the ending inventory balance, ensuring that goods received by year-end are included and those not yet received are excluded.

To Best Ascertain That a Company Has Properly Included Merchandise