Method
Items dated from the first day of the before window through the year-end date form the before group, and items dated after year end through the after window form the after group. Items with an absolute amount at or above the key amount are all selected. The rest are numbered and a simple random sample is drawn without replacement from a seeded generator, so the pick repeats for the same inputs.
Source
Cutoff is an assertion about classes of transactions, and the procedures that address it belong to the auditor's response to assessed risks under AU-C 315. The standards leave the window, the key-item amount and the sample size to the auditor's judgment, so none of them is fixed here. See also cutoff testing in an audit.
When to use it
Use it for revenue and receivables (shipping documents against invoice dates), inventory and purchases (receiving reports against recording dates) and payables. Run it once on the sales or shipment file and again on the receiving or invoice file.
Limits
The tool works from the dates in the file you paste. If the file holds invoice dates and the risk is in shipping dates, trace to the shipping documents. A random pick from the remaining items is not a statistical sample unless you size it as one. Check the result against your firm's methodology before relying on it.
Common questions
What is a cutoff test?
A test that transactions near the balance sheet date are recorded in the right period. Cutoff is one of the assertions about classes of transactions: a sale shipped after year end recorded before it overstates revenue, and a receipt in January recorded in December misstates inventory and payables. The test checks the date on the support against the period of the entry.
Why test both sides of year end?
Items booked just before year end may belong after it, and items booked just after year end may belong before it. Testing one side finds only one kind of error. This tool selects from a window before and a window after the date you enter.
How wide should the window be?
Wide enough to cover the entity's normal lag between shipment, invoicing and recording. A client that invoices weekly needs a wider window than one that invoices on shipment. The tool takes the days before and after as inputs, so set them from how the client actually records transactions and note the reasoning in the workpaper.
How does the selection work?
Every item at or above your key amount is selected. From the rest, the tool draws a simple random sample of the size you set, using a seed. The same data, window, key amount and seed give the same picks, so a reviewer can reperform the selection. The year-end day counts as before year end.
Is the random pick enough?
The tool picks items; it does not size the sample or evaluate errors. Set the number from your own risk assessment and methodology, and project any cutoff error you find. For unrecorded liabilities, pair this with a search of payments after year end.
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.