Final answer:
The question discusses auditing procedures to detect cutoff errors in stating liabilities. An example illustrates a potential overpayment case averted due to an employee's attentiveness to an error in an equipment bill.
Step-by-step explanation:
To test for cutoff errors that potentially misstate liabilities, an auditor should trace the receiving reports to the vendors' invoices. This audit procedure ensures that recorded liabilities are accurate and reflect the goods and services actually received by the company. Noel's proactive approach in identifying an equipment bill that nearly resulted in a $250,000 overpayment exemplifies the importance of vigilance in auditing. Noel's actions underscore the significance of immediate communication and a thorough review process in the financial oversight of a company. By alerting the accounting department and others involved through various communication channels, Noel helped prevent a substantial financial error.