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How to test the cutoff assertion for revenue?

The primary concern for cutoff with revenue is that revenue transactions are recorded in the proper period. The audit team should typically focus on the few days before and after the cut-off date (i.e. December 31st for a calendar year reporting period).

As the audit team, you would request a detailed listing of all transactions that occurred on the days around your cutoff date and request invoices to validate the transaction date. It is a very simple test because if the company recorded a revenue transaction in Year 1 that had a date of January 2, Year 2, then you know that is wrong!

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