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A revenue cut-off risk in a manufacturing company is BEST tested by:
AInspecting shipping documents in the days surrounding year-end and tracing to the GL
BConfirming year-end balances with random customers
CReading the marketing plan
DComparing fixed assets to depreciation schedule
Answer & Solution
Correct answer: A. Inspecting shipping documents in the days surrounding year-end and tracing to the GL
1. Cut-off depends on whether the dispatch occurred before/after year-end.
2. Shipping documents around the cut-off date provide direct evidence.
3. Confirmations test existence, not cut-off.
_Source: ICAI BoS CA Final Paper 3, Ch 3 "Risk Assessment and Internal Control"_
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