After the inventory count, which action helps ensure cut-off details are correct?

After the inventory count, which action helps ensure cut-off details are correct?

• A. Check sequence of count sheets
• B. Trace own test count items to final inventory records
• C. Check replies from 3rd parties
• D. Follow up cut off details

Answer: (C)

The main idea is obtaining external evidence to verify when transactions near period end were recorded, to confirm that inventory cut-off is correct. Checking replies from third parties provides independent confirmation about shipments or receipts around the reporting date. For example, a supplier confirmation can show whether goods were shipped before or after the period end, and a carrier or customer confirmation can verify whether items in transit should be included in the closing inventory or recorded in the next period. This external evidence helps ensure the items are reflected in the correct period, reducing the risk of misstatement due to timing. The other options focus more on the internal count process or the mechanics of recording, not directly on validating the timing of recognition. While following up cut-off details is important, external third-party responses give objective corroboration about the actual timing of goods movements, which is the core of cut-off testing.

The main idea is obtaining external evidence to verify when transactions near period end were recorded, to confirm that inventory cut-off is correct. Checking replies from third parties provides independent confirmation about shipments or receipts around the reporting date. For example, a supplier confirmation can show whether goods were shipped before or after the period end, and a carrier or customer confirmation can verify whether items in transit should be included in the closing inventory or recorded in the next period. This external evidence helps ensure the items are reflected in the correct period, reducing the risk of misstatement due to timing.

The other options focus more on the internal count process or the mechanics of recording, not directly on validating the timing of recognition. While following up cut-off details is important, external third-party responses give objective corroboration about the actual timing of goods movements, which is the core of cut-off testing.