According to Prince2 workbook the correct answer should be A:
The objective of the initiating a project process is to ensure that there is a common understanding of:
•the reasons for doing the project, the benefits expected and the associated risks
•the scope of what is to be done and the products to be delivered
•how and when the project product will be delivered and at what cost
•who is to be involved in the project decision-making
•how the quality required will be achieved
•how baselines will be established and controlled
•how risks, issues and changes will be identified, assessed and controlled
•how progress will be monitored and controlled
•who needs information, in what format and at what time
•how the corporate, programme management or customer method will be tailored to suit the project.