The correct answer is D. 1, 2, 3.
Valuation is the process of determining the worth of an asset or liability. Verification is the process of checking the accuracy of information. Vouching is the process of tracing a transaction from the source document to the accounting records.
In the audit process, the auditor will first value the assets and liabilities of the company. This will involve looking at the company’s financial statements and determining the fair value of the assets and liabilities. The auditor will then verify the accuracy of the information in the financial statements. This will involve checking the source documents for the transactions and making sure that the transactions have been recorded correctly in the accounting records. Finally, the auditor will vouch the transactions. This will involve tracing the transactions from the source documents to the accounting records.
The following is a brief explanation of each option:
- Option A: 3, 1, 2. This is not the correct sequence of the activities undertaken by an auditor. The auditor will not vouch the transactions before verifying the accuracy of the information in the financial statements.
- Option B: 3, 2, 1. This is not the correct sequence of the activities undertaken by an auditor. The auditor will not verify the accuracy of the information in the financial statements before valuing the assets and liabilities of the company.
- Option C: 2, 3, 1. This is not the correct sequence of the activities undertaken by an auditor. The auditor will not vouch the transactions before valuing the assets and liabilities of the company.
- Option D: 1, 2, 3. This is the correct sequence of the activities undertaken by an auditor. The auditor will first value the assets and liabilities of the company, then verify the accuracy of the information in the financial statements, and finally vouch the transactions.