Welcome to AUD: multiple answers that could be right maybe, and the right one is the “best”.
Lost documentation could be a sign of fraudulent activity (asset cost is being mis-reported, and the documentation is disposed off so that auditors won't know), which would be A. But, it could also be a sign of bad recordkeeping, or of a fire that destroyed the accounting office, or something else. So, an auditors shouldn't think that all missing documentation is fraud; it might be, it might not be. Because it might not be, A isn't the right answer, cause you shouldn't instantly think it's absolutely fraud.
B, you could have people in a position of power abusing their power to destroy records or something like that, but again you can't conclude that absolutely based off of missing paperwork.
C would be more likely if you had paperwork but no asset; to have the asset means it's not been misappropriated, so while the paperwork could've been misappropriated I guess technically, it's not as likely that someone would steal the paperwork for some personal gain, so C isn't very likely. You have to think of theft of something of value with misappropriation. Since you have the asset, it's probably not theft.
D doesn't say exactly what did happen, just that there's increased risk. This is the right answer. Cause, you need to recognize the risk, and recognize that someone might have fraudulently reported the asset, that someone might have abused their power related to it, and that someone might have stolen records. But, you need to keep a somewhat open mind so that you can determine which one of those it is. I'd say the missing paperwork, at minimum, indicates a broken system, so you've got increased risk of fraud related to this asset but maybe also related to other information, if the flaw in the controls is related to more than just this asset.
I could make an argument for pretty much any of these options. But with AUD, it's not “what could be right”, but “what is best”. Learning to answer “what's best” instead of “what's plausible” is one of the keys to succeeding with AUD.
.