Cycle CountWe use...

Cycle Count
We use daily cycle counting (Using On Hand Value) with only 1 class and only 1 compile a year, the Sox's Auditor has asked how do we know that we have counted all Items. 
She has selected an Item that has been in the Compile for the last 2 year and throught has had movements in and out, but it does not appear on the Cycle Count entries and adjustments report.
What possible explaination can i give her?

Hoppyjoe 

She has selected an Item that

She has selected an Item that has been in the Compile for the last 2 year and throught has had movements in and out, but it does not appear on the Cycle Count entries and adjustments report.
 

An item in compile with Using On Hand Value criteria does not mean that item is cycle count enabled.
Using On Hand Value considers all the items in the inventory/sub inventory.
Check if the cycle count is enabled for the item.
Also check the assigment group. if the item is assigned or not