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I’m not familiar with the terminology on bank cut-off statements. What does this mean and how can I tackle questions like this on the exam? Thanks

Question CPA-02574

On receiving a client’s bank cutoff statement, an auditor most likely would trace:

a. Prior-year checks listed in the cutoff statement to the year-end outstanding checklist.

b. Deposits in transit listed in the cutoff statement to the year-end bank reconciliation.

c. Checks dated after year-end listed in the cutoff statement to the year-end outstanding checklist.

d. Deposits recorded in the cash receipts journal after year-end to the cutoff statement.

Explanation

Choice “a” is correct. The auditor should obtain bank cutoff statements that include transactions for 10 to 15 days after year-end. The outstanding checks and deposits in transit at year-end on the bank reconciliation should agree with the information in the bank cutoff statement.

done

[mla1169]

I think its going to look like any bank statement you've ever seen in your life, the significance of being a cut off statement is the auditor is telling the bank “please run a statement dated Jan 15” instead of a date that the bank would normally use for the same account. So the prior year checks are reconciling items to the bank statement because they've been written but not cashed yet. The auditor wants to check the bank account a few weeks later to make sure the checks have been cashed. If they haven't cleared the bank it may be a sign of a problem.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

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