The following is a copy of the auditor’s working paper relating to the cut-off procedures for inventory sales for the client New Millennium Ecoproducts. 

Required 

(a) Why is an auditor interested in whether inventory movements are recorded for the correct date? 

(b) The test described in the working paper focuses on the date of the inventory count and is used to verify inventory balance details. Why is the test also relevant to sales revenue? 

Transcribed Image Text:

New Millennium Ecoproducts 12/31/2016 $ 000 CLIENT: Period end: EY Currency/unit: F05.1-INVENTORY CUT-OFF (Sales) wor ed Reference F05.1 INVENTORIES OUT (SALES): Movement Date of shipping Reference recorded in the Recorded of shipping Customer proper period? Quantity Before counts After counts TM/Ref Yes/No document document Comments name GOODS OUT BEFORE COUNT DATE 2,000 2,500 3,100 1,200 1,500 12/27/2016 SHP3498 123 Brighter Bobs 12/28/2016 SHP3498 156 Grey Ghosts 12/29/2016 SHP3498 189 Green Bill Yes Yes Yes 12/30/2016 SHP3498 223Jerry Lights Yes 12/30/2016 SHP3498 456 Mad Monday Yes х etc... GOODS OUT AFTER COUNT DATE 01/01/2017 SHP3498 789 Poor Petes 2,200 3,500 900 Yes 01/01/2017 SHP3498 923 Sorry Stu 01/02/2017 SHP3499 456Very Well 01/03/2017 SHP3498 789 Brighter Bobs 01/04/2017SHP3499 923 Grey Ghosts Yes х Yes 8,500 Yes 1,000 Yes etc... Key to audit tickmarks: v Agrees to documentation supporting revenue recognition (e.g. delivery note, shipping reports, sales contracts, ownership transfer condition...). Comments: • NA