B is corrent because the objective of purchase cutoff procedures is to ascertain whether all merchandise owned by the client at year-end is properly included in year-end inventory. For example, goods which are shipped to the client FOB shipping point before year-end but not received until after year-end are owned by the client and should be included in inventory (the related liability should also be recorded).
A is incorrect because reviewing contractual commitments made by the purchasing department is considered part of the auditor’s cutoff procedures. Therefore, this answer is only partially correct.
C is incorrect because reviewing the terms of open purchase orders is considered part of the auditor’s cutoff procedures. Therefore, this answer is only partially correct.
D is incorrect because reviewing purchase invoices received near year-end is considered part of the auditor’s cutoff procedures. Therefore, this answer is only partially correct.
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