Reviewing and evaluating records used to prepare a company's financial statements is referred to as:

• A. Journalizing
• B. Reconciling
• C. Posting
• D. Auditing

Answer: (D)

Verified step by step guidance

1. Understand the concept of auditing: Auditing refers to the process of reviewing and evaluating the records, transactions, and procedures used to prepare a company's financial statements to ensure accuracy, compliance, and reliability.
2. Differentiate between the terms provided: Journalizing involves recording transactions in the journal, reconciling refers to matching records to ensure consistency (e.g., bank reconciliation), and posting involves transferring journal entries to the ledger accounts.
3. Recognize that auditing is distinct from these processes: Auditing is a higher-level activity that focuses on verifying the integrity of financial statements rather than recording or transferring transactions.
4. Consider the role of an auditor: Auditors examine financial records, internal controls, and compliance with accounting standards to provide assurance that the financial statements are free from material misstatement.
5. Conclude that the correct term for reviewing and evaluating records used to prepare financial statements is auditing, as it encompasses the verification and validation of financial information.