For a proper valuation assertion, which audit procedure is crucial?

The valuation assertion in an audit relates to whether the assets, liabilities, and equity are recorded at appropriate amounts. To substantiate this assertion, inspecting supporting documentation is essential because it involves examining relevant records, such as invoices, contracts, and other financial documents, that provide evidence of the reported values.

Through this inspection, auditors can verify that transactions were recorded at their correct amounts, which helps to ensure that impairments, discounts, or accrued liabilities have been accurately reflected in the financial statements. By confirming the amounts through direct evidence, the auditor can establish a higher level of assurance that the recorded values meet the applicable financial reporting framework's requirements.

Inquiry of management, while useful for gaining insights and understanding the entity’s processes, does not provide the concrete evidence needed to validate the amounts reported. Altering recorded balances violates ethical standards and is not an auditor's procedure but rather a concern that auditors must investigate. Cross-verification with third parties can support the existence and rights assertions but is not typically used directly for valuation purposes. Hence, inspecting supporting documentation stands out as the most crucial audit procedure for a proper valuation assertion.