The correct answer is C) induced magnetism in the horizontal soft iron. The soft iron spheres mounted on arms on the binnacle compensate for the induced magnetism in the horizontal soft iron components of the vessel. As the ship's heading changes, the induced magnetism in the horizontal soft iron can cause deviations in the compass reading. The soft iron spheres counteract this effect by generating a magnetic field that offsets the induced magnetism, helping to maintain an accurate compass reading. The other options are incorrect because they do not accurately describe the primary purpose of the soft iron spheres. Option A refers to residual deviation, which is a different concept. Option B is incorrect as the soft iron spheres compensate for induced magnetism, not the permanent magnetism of the vessel. Option D is incorrect as the soft iron spheres compensate for the vessel's own magnetic fields, not external electrical currents.