Final answer:
The correct option is d). Vouching of transactions in auditing involves directional testing either forward or backward by inspecting the documentary evidence and checking for discrepancies between the records and actual transactions.
Step-by-step explanation:
Vouching of transactions is a process used during an audit to verify the authenticity and validity of transactions recorded in the books of accounts. Vouching deals with the inspection of documentary evidence to see if there are any discrepancies between the records and the actual transactions. When you ask whether vouching involves 'testing forward,' 'testing backward,' 'testing at a point in time,' or 'directional testing either forward or backward,' you're referring to the direction in which auditors trace transactions.
The correct answer for this is d. Directional testing is either forward or backward. This means that during the vouching process, an auditor may test the transactions from the original documents (such as invoices, contracts, or receipts) forward to the ledger entries, which is 'testing forward,' or from the ledger entries back to the original documents, which is 'testing backward.'