Final answer:
An auditor reviews bank confirmations for liens on receivables to test the rights and obligations assertion, aiming to confirm the entity's ownership and any restrictions on receivables.
Step-by-step explanation:
When reviewing bank confirmations for any liens on receivables, the auditor is testing the rights and obligations assertion. This refers to whether the entity has the rights to the receivables it has reported and whether any obligations, such as liens or pledges, may restrict its rights.
An auditor looks for evidence that receivables are owned by the entity and assesses whether any disclosed or undisclosed liens exist that could affect the entity's ability to use or transfer the receivable.
Confirmation with banks where the entity maintains accounts or has loans can reveal whether the receivables have been pledged as collateral, thereby affecting the rights and obligations assertion.
When reviewing bank confirmations for any liens on receivables, the auditor is testing the rights and obligations assertion. This assertion ensures that the company has legal ownership of the receivables and is entitled to collect the amounts due