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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Audit procedures and obtaining evidence

Harbour Freight Co's auditor wants to test whether sales invoices were recorded in the correct period. Using audit software, the auditor will extract all invoices dated within five days either side of the year end and compare invoice dates with dispatch dates from the warehouse system. Which assertion is this procedure primarily designed to address?

The procedure addresses cut-off. By extracting invoices near the year end and matching their dates to dispatch dates, the auditor checks that sales were recorded in the period when goods were actually delivered, rather than too early or too late.

  1. ACut-offCorrect
  2. BRights and obligations
  3. CClassification
  4. DValuation and allocation

Explanation

Comparing invoice dates with dispatch dates around the year end tests whether transactions were recorded in the period in which they occurred, which is cut-off. Rights and obligations concerns ownership, classification concerns the correct account, and valuation concerns amounts.

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