I found that our inventory balance in G/L is not matched with the balance in item valuation report. In G/L, the transactions are all posted from inventory receipts, assembly, adjustments and order entry. I did not enter any misc journal entries. The transactions are posted by the date. Should the two balances be matched? why not matched?

Have you posted any transactions into Inventory since your period end in the general ledger? The amounts in the Inventory file are running balances. You have to print the item valuation report "as at" a specific date to get the number that should tie back to the general ledger.