D is corrent because holding the sales journal open (i.e., recording sales of the next period in this period) inflates sales in the current period and this should be detected by the auditor’s cutoff work.
A is incorrect because kiting involves the overstatement of cash through the improper recording of bank transfers and generally would not be detected by the auditor’s cutoff tests of the sales journal. Kiting occurs when an unrecorded check is drawn on one bank and deposited in another bank at yearend. At the balance sheet date, the cash is counted as being in both banks.
B is incorrect because lapping year-end accounts receivable involves misappropriating cash remittances received as payment on customers’ accounts and generally would not be detected by the auditor’s cutoff tests of the sales journal.
C is incorrect because the misappropriation of merchandise would not be apparent from examining the sales journals.
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