Why is observation important as an audit technique?

Observation is a crucial audit technique because it provides auditors with a direct view of processes as they occur in real time. This enables the auditor to verify compliance with established procedures and assess whether employees are adhering to documented practices. By witnessing operations firsthand, auditors can identify discrepancies between what is intended in procedures and what is actually practiced. This ability to validate procedures against actual performance is essential for determining the effectiveness and efficiency of the quality management system.

While the other options present valid points, they do not capture the primary importance of observation in the audit process as succinctly. For example, mandate by ISO standards (the second option) does not inherently highlight why observation itself is valuable; rather, it states a requirement without addressing its significance in the audit process. The third option, suggesting immediate improvements, downplays the observational aspect's purpose in verifying compliance and understanding the process before making any recommendations. Lastly, while the fourth option mentions the necessity to observe adherence after reviewing procedures, it is more about the sequence of actions rather than emphasizing the observation's direct verification aspect. Thus, the first option most accurately reflects the essence and primary value of the observation technique in auditing.