A common audit management letter comment given to organizations is due to cut-off issues. There are two types of cut-off issues, accounts payable/expenses and checks.
Cut-off issues for accounts payable/expenses arise when an expense is booked in an incorrect period leaving the liability to be misstated. According to GAAP, expenses should be booked in the period the expense occurred. Therefore if the work has been performed prior to year end, even if the invoice is received after year end, the expense and liability should be recorded in the previous year. For example, a lawyer gives you advice in December …read more
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