Costs used to value inventory must be tested by the auditor only to determine whether the client has followed an inventory method which is in accordance with generally accepted accounting principles.

Question

Quizplus · Accepted Answer

While it is true that the auditor must determine whether the client's inventory method is in accordance with GAAP, the auditor must also test the client's cost calculations to ensure that they are accurate and properly reflect the cost of goods sold. This helps to ensure that the financial statements are free from material misstatement.

Costs Used to Value Inventory Must Be Tested by the Auditor