What procedure involves verifying documentation for compliance with GAAP?

The procedure that involves verifying documentation for compliance with Generally Accepted Accounting Principles (GAAP) is the review of disclosures. This procedure entails examining the financial statements and accompanying notes to ensure that all relevant information is presented as per GAAP requirements. This includes checking for appropriate presentation, measurement, and disclosures concerning accounting policies, contingencies, and other critical aspects that must be in line with GAAP.

Reviewing disclosures is crucial because it helps ensure that stakeholders, including investors and creditors, have access to the necessary information to assess the financial health of the company accurately. It ensures that the financial statements provide a true and fair view of the organization's financial performance and position, adhering to the rigorous standards set forth by GAAP.

In contrast, observing processes does not involve checking documentation directly against GAAP. Vouching transactions focuses on verifying specific entries by tracing them back to source documents, which is more about transaction accuracy rather than overall compliance with presentation standards. Inquiry of management can gather insights into accounting policies and practices but does not provide the same level of verification of compliance as a detailed review of disclosures does.