An internal auditor must weigh the cost of an audit procedure against the persuasiveness of the evidence to be gathered. Observation is one audit procedure that involves cost-benefit tradeoffs. Which of the following statements regarding observation as an audit procedure is/are correct?
I. Observation is limited because individuals may react differently when being watched.
II. Observation is more effective for testing completeness than it is for testing existence.
III. Observation provides evidence about whether certain controls are operating as designed.
a. I only.
b. II only.
c. I and III.
d. I, II, and III.