Final answer:
Vouching tests are for omitted transactions, while tracing tests are for nonexistent transactions. The correct answer is B)
Step-by-step explanation:
The correct answer is B) Vouching; tracing. When it comes to auditing, vouching refers to examining transactions from the company's books and records to support their accuracy and completeness. Vouching tests are used to verify the existence of transactions.
On the other hand, tracing involves starting with a source document, such as an invoice or a receipt, and following the trail to the company's books. Tracing tests are used to identify any omitted transactions. For example, if an auditor wants to vouch an Accounts Receivable entry.
They might examine the sales invoices and corresponding customer payments. Alternatively, if they are tracing a cash receipt, they would trace it back to the bank statement and the customer invoice. Both vouching and tracing are essential components of a comprehensive audit process.