Internal Control over Financial Reporting (ICFR) is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with Generally Accepted Accounting Principles (GAAP). A core component of this process is ensuring the validity of management's assertions embedded in the financial statements. The assertion that "all assets and liabilities have been properly valued and, where applicable, all costs have been properly allocated" directly corresponds to the "Valuation and Allocation" assertion. This is a fundamental objective of ICFR, as it ensures that financial statement elements are included at appropriate amounts and any necessary adjustments are correctly recorded.

A. This relates to budgetary and compliance controls, which ensure adherence to laws on spending authority, not the reliability of financial reporting itself.

B. This describes a single, specific control activity (a physical inventory) supporting the existence assertion for assets, not the overall purpose of ICFR.

D. This addresses operational objectives (program effectiveness), which are distinct from the financial reporting objectives that ICFR is designed to meet.

1. U.S. Government Accountability Office (GAO). (2014). Standards for Internal Control in the Federal Government (GAO-14-704G, "Green Book").

Page 7, "Objectives of an Entity": The document defines three categories of objectives: operations, reporting, and compliance. The reporting objective pertains to the "preparation of reliable reports," which includes financial statements.

Page 49, OV2.27: Discusses how management uses assertions for financial reporting, which "fall into categories such as existence or occurrence, completeness, rights and obligations, valuation or allocation, and presentation and disclosure." Option C is a direct example of the valuation or allocation assertion.

2. Committee of Sponsoring Organizations of the Treadway Commission (COSO). (2013). Internal Control—Integrated Framework: Executive Summary.

Page 3: States that one of the three major categories of objectives for internal control is "Reporting." It specifies this category relates to "internal and external financial and non-financial reporting and may encompass reliability, timeliness, transparency, or other terms as set forth by regulators, recognized standard setters, or the entity’s policies." The assertion in option C is a key element of reliable financial reporting.

3. Office of Management and Budget (OMB). (2016). Circular No. A-123, Management's Responsibility for Enterprise Risk Management and Internal Control.

Appendix A, Section I, "Introduction": Defines the objective of internal control over financial reporting (ICFR) as providing "reasonable assurance that the agency’s financial reporting is reliable." Reliable reporting requires that the underlying assertions, including valuation, are valid.