The Company’s financial statements depend on the inventory balance and are a function of the quantity of inventory on hand and the value of the inventory. The quantity is known by the inventory observation tests and the cost of the inventory is dependent on price testing tests. The accounting standards require that inventory is held in the financial statements at low cost or market price. The verification of price testing is done by the cost that the company paid for the materials, labor, and overhead that goes into the product inventory. The auditor will prefer items from the company’s inventory on a test basis to perform price testing. This is verified through the analysis of original documentation like invoices and time cards, that the inventory’s cost is carried out exactly as per the company’s financial records.