Choice "C" is correct. Observation of client personnel is the audit technique most likely to provide an auditor with the most assurance about the effectiveness of the operation of an internal control. This technique is especially effective for controls that leave little or no audit trail.
Choice "b" is incorrect. Confirmation with outside parties is a common substantive test (direct test of an account balance), not a procedure used to test controls.
Choice "a" is incorrect. While inquiry of client personnel can provide some evidence about the effectiveness of the operation of internal control, the auditor's direct observation generally provides greater assurance than does inquiry.
Choice "d" is incorrect. Recomputation of account balance amounts is a substantive test, not a test of controls.