What it is
Cutoff tests check that transactions near year end are recorded in the right period. They respond to the risk of recognizing revenue early and leaving liabilities unrecorded, and they work from the last and first shipping and receiving documents each side of the period end.
This workbook has a sales tab, a purchases tab and an inventory count tab. Enter documents with their dates and terms; the workbook picks the date control transfers, compares the period recorded with the correct period, calculates the revenue, cost of sales and payables misstatement, and summarizes the result against performance materiality.
When to use it
- Testing revenue and cost of sales cutoff on any entity that ships goods.
- Testing receiving cutoff and accounts payable at year end.
- Documenting the response to the presumed fraud risk in revenue recognition.
What’s inside
- Sales cutoff: shipping and delivery dates, terms, control transfer date, period recorded vs correct
- Purchases cutoff: ship and receipt dates, title transfer, payable misstatement
- Inventory cutoff: last receiving and shipping documents at the count
- Summary of errors, net and gross misstatement and percent of performance materiality
Standard cited
This template follows AU-C 330 / ASC 606. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use. See AU-C 330 explained.
Questions
Which date decides the period for a sale?
The date control of the goods transfers to the customer (ASC 606-10-25-30). For FOB shipping point that is usually shipment; for FOB destination it is delivery. Contracts with acceptance clauses, consignment or bill-and-hold terms need their own analysis.
How many items should be tested?
The workbook holds 60 lines per test. A common approach is the last and first documents each side of year end plus all large items, but sample size is your decision under your sampling policy.
What if there are errors?
Evaluate whether they are isolated or point to a control weakness, extend testing where the cause is unknown, carry misstatements to the summary of uncorrected misstatements and consider whether they indicate management bias.
Related templates
- Audit Program: Accounts Receivable and Revenue
- Subsequent Disbursements Testing Workpaper
- Inventory Observation Memo and Test Count Sheet (AU-C 501)
- Summary of Uncorrected Misstatements (AU-C 450)
Last updated 11/05/2026. All free templates.