The audit of year-end physical inventories should include steps to verify that the entity's purchases and sales cutoffs were adequate. The audit steps should be designed to detect whether merchandise included in the physical count at year-end was not recorded as a:
A)sale in the subsequent period.
B)purchase in the current period.
C)sale in the current period.
D)purchase return in the subsequent period.

Question

Quizplus · Accepted Answer

The audit steps aim to ensure that merchandise counted in the year-end physical inventory was properly recorded as sales in the current period. If sales are not correctly recorded, it could lead to an overstatement of inventory and an understatement of revenue, affecting the accuracy of financial statements.

The Audit of Year-End Physical Inventories Should Include Steps to Verify