Final answer:
The auditor's test of examining documentary evidence of credit approval primarily supports the valuation assertion in financial statements. It ensures that transactions are authorized and recorded at the correct value, but does not directly assess completeness. Therefore, the correct answer is 'No, Yes' for completeness and valuation, respectively.
Step-by-step explanation:
An auditor performing tests of controls in the revenue cycle is primarily concerned with evaluating the effectiveness of the controls that management has implemented to prevent or detect material misstatements in the financial statements. In this case, the tests described aim to ensure that sales and the corresponding receivables are recorded at the appropriate amounts, which supports the valuation assertion.
By making inquiries of company personnel about credit-granting policies and examining evidence of credit approval, the auditor assesses whether the policy is adhered to and if sales recorded in the general ledger are properly authorized. This directly relates to the valuation assertion because it ensures that transactions are recorded at the correct value and terms.
The correct answer to the student's question is option B: No, Yes. Completeness refers to whether all transactions that should have been recorded have been recorded. In the test described, completeness is not being directly tested. Valuation, on the other hand, is being tested because the auditor is verifying the appropriate authorization and accuracy of the transaction values recorded.