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    Sample size for account payable verifying cut-off assertion

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    What is the sampling unit for account payable if the auditor is verifying the cutoff assertion?

    © BrainMass Inc. brainmass.com October 4, 2022, 3:37 pm ad1c9bdddf

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    When performing cut-off procedures, an auditor would be looking at invoices recorded in the period immediately following the end of the accounting period under audit. Normally the audit of subsequent invoices would extend for a minimum of 30 days after the year end. The purpose for performing cut-off procedures is to be certain that all valid liabilities are recorded in the proper accounting period, and that inventory is properly stated based on those tests.

    Therefore, the sampling unit would include every invoice recorded after year end for a specified period of time.

    Following are referenced definitions of cut-off and sampling units.

    Cut-Off Date: Audit procedure for determining whether a transaction took place before or subsequent to the end of an accounting period. It assures that the transaction has been recorded in the proper period. It is the date chosen to stop the flow of transactions, merchandise, cash, and so on for audit purposes. For example, in taking a physical inventory, there must be a cutoff date applicable to sales and purchases. This may require closing receiving and shipping rooms while the inventory count takes place. Transactions of one period must be distinguished from those of another. Cutoff errors must be diligently avoided when recording transactions.


    1. Sampling Unit Definition. A representative, individual piece of the population selected for sampling is the sampling unit. The sum of all sampling units is the total population count. It is important to determine what constitutes a sampling unit and what does not. Also, consider how each sampling unit will impact your conclusion. If the sample contains too many sampling units that will not support the test objective, then the objective won't be achieved.

    2. Number of Sampling Units Definition. Count the number of items defined as a sampling unit. Counting helps with the population definition and serves in determining the appropriate sample size.

    3. Sample Selection Method Definition. Define the method of sample selection as specifically as possible. Use enough detail when documenting the sample selection method so that anyone can re-perform the testing. Also, as applicable, document any computer query language used.

    4. Document Factors Used to Determine Sample Size. Several factors determine sample size, including population size, tolerable error, acceptable sampling risk, degree of reliance, and risk assessment results. Define the scale or the meaning of "high," "moderate," and "low" risk as they apply to the test. Identify the tolerable error as well as the method used to define it. Also, document the methods used to determine the acceptable sampling risk and the degree of reliance that can be placed on the results.

    5. Sample Selection. Sample selection is influenced by the tools the auditor plans to use. Audit software packages provide the necessary guidance for sample selection. A random number table can also be used by the auditor by assigning a random number to each sampling unit and then arranging the units based on the assigned number and then selecting the units from the top down or bottom up.


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