The correct answer is C. Vouching.
Vouching is the process of checking the evidence of the entries in the accounting records. It is a way of ensuring that the entries are accurate and that the transactions they represent have actually taken place.
Vouching can be done by examining supporting documents, such as invoices, receipts, and contracts. It can also be done by interviewing people who are involved in the transactions, such as employees, customers, and suppliers.
Vouching is an important part of the audit process. It helps to ensure that the financial statements are accurate and that the company is operating in a legal and ethical manner.
Here is a brief explanation of each option:
- A. Verification: Verification is the process of checking the accuracy of information. It can be done by comparing the information to other sources, such as documents or records.
- B. Observation: Observation is the process of watching something happen. It can be used to verify that a transaction has taken place or to assess the quality of work being done.
- C. Vouching: Vouching is the process of checking the evidence of the entries in the accounting records. It is a way of ensuring that the entries are accurate and that the transactions they represent have actually taken place.
- D. Inspection: Inspection is the process of examining something closely. It can be used to assess the quality of work being done or to identify potential problems.