An auditee uses a cut-off date other than the balance sheet date to ensure PPE purchases have been recorded in the proper period.What impact will this have on the audit?
A)No reliance on internal controls for PPE is possible in this audit and a substantial approach must be taken.
B)No additional audit testing is required beyond the cut-off date.
C)The audit opinion must be modified due to a material GAAP departure in the financial statements.
D)The auditor should verify both the cut-off and the transactions in the roll-forward period.

Question

Quizplus · Accepted Answer

If the auditee is using a cut-off date other than the balance sheet date to ensure PPE purchases have been recorded in the proper period, the auditor should verify both the cut-off and the transactions in the roll-forward period. This means the auditor should perform testing to ensure that PPE purchases have not been recorded in the wrong period, both before and after the cut-off date. This will require additional audit testing. No reliance on internal controls for PPE is possible in this audit and a substantial approach must be taken. However, there is no indication that there is a material GAAP departure that would require a modification to the audit opinion.

An Auditee Uses a Cut-Off Date Other Than the Balance