When labor is a significant part of inventory, verifying the proper accounting of these costs should be tested in the
A) inventory and warehousing cycle.
B) payroll and personnel cycle.
C) acquisitions and payments cycle.
D) cash cycle.

Question

Quizplus · Accepted Answer

Labor costs are typically recorded in the payroll and personnel cycle, so verifying the proper accounting of these costs would be best tested in that cycle. The inventory and warehousing cycle would primarily focus on the physical handling and valuation of inventory, while the acquisitions and payments cycle would focus on the purchase and payment of goods and services. The cash cycle would focus on the management of cash and cash equivalents.

When Labor Is a Significant Part of Inventory, Verifying the Proper