Question

Cutoff misstatements occur when:The auditor fails to obtain the end-of-year bank statement directly from the bank, obtaining instead the statement which includes the two succeeding weeks

Subsequent period
transactions are
recorded in the
current period
Current period
transactions are
recorded in the
subsequent period
A. YesYes No
B. Yes No Yes
C. No Yes Yes
D. No Yes No

Answer 1

Cutoff misstatements occur when transactions are not recorded in the correct accounting period; thus, the correct answer is option C, identifying that subsequent period transactions recorded in the current period and current period transactions recorded in the subsequent period are misstatements.

Step-by-step explanation:

Cutoff misstatements refer to errors that occur when transactions are not recorded in the correct accounting period. Specifically, they happen when:

• Subsequent period transactions are incorrectly recorded in the current period.
• Current period transactions are incorrectly recorded in the subsequent period.

Therefore, the correct option that identifies the cutoff misstatements is:

1. No
2. Yes
3. Yes

Which corresponds to option C: No Yes Yes.