Explain why a proper cutoff of purchases and sales is heavily dependent on the physical inventory observation. What information should be obtained during the physical count to ensure that cutoff is accurate?

1. Explain why a proper cutoff of purchases and sales is heavily dependent on the physical inventory observation. What information should be obtained during the physical count to ensure that cutoff is accurate?
2. A client applies manufacturing overhead to inventory on the basis of $3.47 per direct labor hour. Explain how the auditor will evaluate the reasonableness of total direct labor hours and manufacturing overhead in the ending inventory of finished goods.

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