Cut-off

Whether a transaction was recorded in the right period. Holding the books open for a few days after the year end, so early-April sales land in March, moves profit between years without inventing a single fake transaction.

The manipulation is small, common, and hard to see from outside. The visible traces are a March quarter that is consistently stronger than the pattern of the business supports, and a June quarter that is consistently weak.

Auditors test cut-off directly by matching despatch documents to invoice dates around the year end, which is why it appears as a key audit matter in many reports.

For an outside analyst, the practical defence is to look at four-quarter rolling figures rather than annual ones. A cut-off shift moves profit between adjacent quarters and cancels out over a rolling year, so a metric that looks healthy annually and erratic quarterly is telling you where to look.