B is corrent because tests of controls provide reasonable assurance that prescribed control procedures are being followed. Confirmation is used primarily to substantiate the existence of an account balance and, therefore, is considered a substantive test.
A is incorrect because inspection procedures are used to test whether and by whom controls were performed and to permit an evaluation of the propriety of their performance.
C is incorrect because observation is a test of control which allows the auditor to obtain direct personal knowledge of the activity in the form of visual evidence.
D is incorrect because inquiry is a test of control which allows the auditor to obtain evidence in the form of either oral or written representation.
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