When the auditor tests the inventory records,
A)he must understand how direct labor is charged
B)he must understand how raw materials are received
C)he must understand how overhead is incurred
D)he must understand the internal controls in the cost accounting system

Question

Quizplus · Accepted Answer

When testing inventory records, the auditor must understand the internal controls in the cost accounting system to ensure that the records are accurate and reliable. Understanding how direct labor is charged, how raw materials are received, and how overhead is incurred may also be helpful, but they are not the primary focus of testing inventory records.

When the Auditor Tests the Inventory Records