Question

During the audit of Transport Trucking, the auditors performed testing to determine that purchase transactions have been recorded in the correct accounting period. Which assertion was the auditor most likely addressing?

1) Rights and obligations
2) Accuracy
3) Cutoff
4) Classification

Answer 1

The auditors were most likely addressing the cutoff assertion to ensure that purchase transactions were recorded in the correct accounting period, which is crucial for accurate financial reporting.

Step-by-step explanation:

During the audit of Transport Trucking, the auditors who were performing testing to determine if purchase transactions have been recorded in the correct accounting period were most likely addressing the cutoff assertion. The cutoff assertion specifically concerns itself with whether transactions and events have been recorded in the correct accounting period which is critical for the accurate presentation of financial statements and compliance with the accrual basis of accounting. The cutoff tests are a standard procedure during financial statement audits to ensure that revenues and expenses are recognized in the period in which they are incurred. It is key in avoiding misstatements in the financial records of a company.