Annual Physical Inventory

I would never not take a physical inventory even with a review. Inventory fraud, theft, obsolescence, etc. are one of the biggest problem areas of acct and auditing.

Controls should not be put in place AFTER an event happens. You should operate with the appropriate controls from the beginning. What might be considered extra steps are really time and money saving processes to avoid what Joseph refers to in his comments (fraud, theft, obsolescence).

I'm interested in what "reasonable proof" would be.
That being said (and echoing the above); for operational purposes, streamlining the inventory reviews makes sense. Boil it down to what you need to know operationally; use spot checks to test the process (random selection).

For audit purposes, however, you're solving a different problem. The audit should ensure that the process result matches reality. To do that you actually need to check the inventory.

What type of inventory are you talking about? An annual inventory (where what ever problems are discovered can be 12 months old) or cycle counting where all inventory is counted at least once if not monthly (or better) and a system where the same people don't count the same inventory.

That together with MRP/DRP or JIT would provide enough "proof" that inventory numbers were sold. If you kept running out of parts then something is wrong (with JIT you find out very quickly (no or extremely limited safety stock), with MRP/DRP you find out when you know your dipping into safety stock).