Final answer:
An auditor tracing sales prices to an authorized price list is performing the procedure of examination. This form of substantive testing checks for the accuracy and adherence to pricing policies. It should not be confused with inquiry, observation, or reperformance, which are different audit procedures.
Step-by-step explanation:
When an auditor traces the sales prices to the authorized price list in effect at the date of the transaction, they are performing a procedure known as examination. This procedure involves the auditor verifying the sales transactions recorded by the company to ensure they match the authorized pricing, thus confirming accuracy and adherence to the pricing policy. It is a form of substantive testing that auditors use to obtain audit evidence about the amounts and other data related to transactions.
The term reperformance, refers to when the auditor independently executes procedures or controls that were originally performed as part of the entity's internal control. The auditor's goal during reperformance is to verify the accuracy of the client's control processes.
By comparing sales prices to the authorized price list, the auditor is not merely making inquiries (asking questions), observing processes, or reperforming a client's procedure, but instead examining documentation and records to verify the correct prices were charged. This establishes the fidelity of the recorded sales transactions to the company's price list in effect.