Does Cutoff Testing Provide Indirect Audit Evidence?

Which of the following do NOT indirect information?

  1. Information about the propriety of cutoff
  2. Reports that show orders that were rejected for credit limitations.
  3. Reports that provide information about any unusual deviations and individual product margins.
  4. The lack of any significant differences between perpetual levels and actual levels of goods. Source Reference Answer

Community Votes

D
75%
A
25%

75% of anonymous learners picked answer D. Votes are pick records left by other test-takers — they are not the verified answer.

Community Insight

Tests your ability to classify audit evidence types, with the common trap being mistaking negative reconciliation results or exception reports for direct proof.

This CRISC question tests the distinction between direct and indirect audit evidence, focusing on how different reporting mechanisms support risk assessments. While analytical and exception reports yield indirect insights, cutoff propriety represents direct verification.

Candidates frequently select D, assuming that a lack of difference provides no information whatsoever, overlooking that negative results still serve as indirect evidence of control effectiveness.

Community Discussion (4 comments)

Ravnit 👍 1 Selected: A
Indirect information refers to data or evidence that is not explicitly stated but can be inferred or derived from other sources. Option A focuses on the propriety of cutoff, which is a direct assessment of whether transactions are recorded in the correct accounting period. This is a direct evaluation, not indirect. Options B, C, and D provide indirect insights: B: Rejected orders for credit limitations indirectly indicate potential revenue or credit risk issues. C: Unusual deviations and product margins indirectly highlight operational or financial anomalies. D: Differences between perpetual and actual inventory levels indirectly point to potential inventory management or recording issues.
heathsem 👍 1 Selected: D
Agee it is D.
Radko96 👍 2 Selected: D
It's D
Promz 👍 1
It's D D. The lack of any significant differences between perpetual levels and actual levels of goods. The lack of any significant differences between perpetual levels and actual levels of goods does not provide indirect information. The other options - information about the propriety of cutoff, reports on rejected orders for credit limitations, and reports on unusual deviations in product margins - all provide indirect information that can indicate potential issues or anomalies in the business operations.

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Expert Analysis

Why the Answer Is Correct

Option A is correct because verifying the propriety of cutoff is a substantive audit procedure that directly confirms whether transactions are recorded in the appropriate accounting period. Unlike analytical or exception-based data, cutoff testing relies on explicit documentation and direct transaction tracing, making it direct rather than indirect evidence.

Why the Other Options Are Wrong

Options B and C utilize exception reporting and analytical reviews, which inherently rely on inference and trend analysis to highlight underlying risks, representing classic characteristics of indirect information. Option D reflects negative reconciliation evidence; while not overtly positive, the absence of variances indirectly supports the reliability of inventory controls and valuation assertions without providing explicit transactional proof.

Community Comment Notes

Although the majority of voters selected D, experienced auditors and ISACA-aligned resources consistently point to A as the correct choice. Comment [1] correctly distinguishes direct assessment from indirect inference, highlighting that cutoff validation explicitly targets period-end accuracy without requiring analytical deduction.

Official Reference

https://www.isaca.org/credentialing/certifications/criscknowledgecenter

Exam Strategy

Always categorize audit evidence by its derivation method: direct evidence comes from explicit observation, inspection, or confirmation, while indirect evidence emerges from analytical procedures, trend analysis, or exception reporting. When faced with 'does NOT' questions, eliminate options that clearly use inference first.

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