Definition of cutoff date

audit procedure for determining whether a transaction took place before or subsequent to the end of an accounting period. It assures that the transaction has been recorded in the proper period. It is the date chosen to stop the flow of transactions, merchandise, cash, and so on for audit purposes. For example, in taking a physical inventory, there must be a cutoff date applicable to sales and purchases. This may require closing receiving and shipping rooms while the inventory count takes place. Transactions of one period must be distinguished from those of another. Cutoff errors must be diligently avoided when recording transactions.