Final answer:
Tracing outstanding checks to subsequent period bank statements is true for testing the cutoff audit objective, as it verifies the correct recording of transactions in the proper accounting period.
Step-by-step explanation:
Tracing outstanding checks to subsequent period bank statements does indeed test the cutoff audit objective. This is true. During an audit, verifying that outstanding checks from the end of the period clear in the next period's bank statement helps ensure that transactions are recorded in the correct accounting period. This is a fundamental part of the audit process called cutoff testing, which ensures that revenues and expenses are recorded in the period in which they occur, hence validating the timing of transactions and the overall integrity of the financial statements.