Final answer:
The auditor is testing the completeness assertion by ensuring that all shipments to customers are properly recorded across various documentation. Option 4 is the correct answer.
Step-by-step explanation:
When tracing a sample of shipping documents from throughout the year to the details of the sales invoices and to the sales journal and customers' accounts receivable subsidiary ledger, the auditor is testing the completeness assertion.
The completeness assertion concerns whether all transactions and accounts that should be presented in the financial statements are indeed included. For shipping documents, this means ensuring that all shipments to customers are recorded in the sales invoices, sales journal, and the customers' accounts receivable subsidiary ledger.
When testing completeness, auditors look for evidence that transactions not only exist but are also recorded in the correct reporting period and that all relevant transactions have been included.
This is opposed to the existence assertion, which focuses on whether the recorded transactions have occurred and pertain to the entity, or the cutoff assertion, which ensures that transactions are recorded in the appropriate accounting period.
Thus, in the context provided by this question, the correct option is 4) completeness.