Page 32 - eBook Audit Of Financial Statement Components

(b) Purchase Cut-off Test

The purchase cut-off test is performed to ensure that

current year purchases and payables are recorded in the
current period, and that changes in purchases and

payables are reflected in the records of inventories and

cost of sales for the current year.

i. Obtain the number of the last GRN for the final receipt

of the year.
ii. Select sample of GRN before the last number and

match with the purchase orders date to ensure that

purchases are recognized in the current year.
iii. Also check on the agreement with entries in purchase

journals to ensure that they are recorded in the
current year.
iv. Obtain the first GRN for subsequent year.
v. Select sample of GRN after the date and match with
the purchase orders and supplier's invoices date to
ensure that purchases are recognized in the
subsequent year.
vi. Also check on the agreement with entries in purchase

journals to ensure that they are recorded in the
subsequent year.

(c) Payments Cut-off Test

The payments cut-off test is designed to provide

evidence that payments are recorded in the appropriate

period. A proper cut-off is important to ensure the
correct presentation of cash and liabilities.

Selected payment vouchers before the last number of

the final payments for the current year will be inspected
in terms of date and they will be traced to the payment

journals.

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