Proper flood testing is done after the membrane is installed but before any other materials are placed on top of the membrane. No mud, thinset, tile, etc.

Your pan should have been flood tested when it only had Kerdi, before tile was installed.

The drain gets plugged.

Fill the pan with water, marking the level.

Let sit for the prescribed time. Check the level. Considerations are made for potential evaporative loss.

After the proper time has elapsed, pull the drain plug, check that the water drains freely. No residual pooling, no birdbaths, etc. This is why the membrane itself needs to be sloped to the drain. It's a code violation to install the membrane flat on the subfloor.

Flooding testing the pan after it is grouted and tiled can give misleading results. If the tiled and grouted pan were to be flooded, as it sat overnight water may percolate through the grout into the thinset that bonds the tile to the Kerdi. If the floor tile is a porous natural stone, it can absorb water as well. The water level may drop accordingly. Is the water drop simply due to water percolating through the grout and saturating the thinset under the tile (no leak)? Or is it percolating under the tile and then exiting the pan through a leak in the membrane?

The purpose of flood testing an un-tiled pan is that if there is a leak, the leak location and subsequent repairs can be made quite easily as the membrane is exposed.

A tiled pan can be flood tested, but I'd venture it would have to be flooded with standing water for several days. Flood the pan. Let it sit. When the water level has stabilized due to any water percolating through the grout and into or under the tile, then mark the water level and start the clock. If there is a leak, the specific location can be difficult to pinpoint, so the only true remedy may be to demo and start over.

For permitted work, some AHJs want to see the pan before it is tiled and observe the end of the flood test when the pan gets drained. Some don't care.

If a permit was not pulled, then it's between the homeowner and the person doing the work.

FWIW, if a 4' by 3' shower leaked a gallon of water during a flood test, the water level in the pan would drop by about 1/8".

Thank you this is very helpful! He did not get a permit, I'm not sure what to do about it after the fact. I will tell him not to lay another tile in the shower until the flood test is complete.