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Cutoff

This is a Management Assertion.

Cutoff relates to whether transactions and events have been recorded in the correct accounting period. Audit procedures must ensure that transactions occurring near year-end are recorded in the financial statements in the proper period.

For example, the auditor may want to test proper cutoff of revenue transactions at December 31. This can be done by examining a sample of shipping documents and sales invoices for a few days before and after year-end.

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