Question

If an auditor selects a sales transaction from the journal and examines underlying source documents, it is considered which of the following?

1) Tracing
2) Inspection
3) None of these options are correct choices.
4) Vouching

Answer 1

The act of an auditor selecting a sales transaction from the journal and examining the underlying source documents is known as vouching, which verifies the authenticity of the transactions recorded.

Step-by-step explanation:

When an auditor selects a sales transaction from the journal and examines the underlying source documents, it is considered to be vouching. Vouching is the process of checking the authentication of the transactions recorded in the books of accounts by verifying the documents or evidence that support those transactions. This method helps auditors to ensure that the transactions are recorded correctly and that they actually occurred.