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When reviewing bank confirmations for any liens on receivables, the auditor is testing the ______________ assertion.

Option 1: Existence
Option 2: Valuation or allocation
Option 3: Rights and obligations
Option 4: Completeness

1 Answer

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Final answer:

The auditor reviews bank confirmations for liens on receivables to test the Rights and obligations assertion, ensuring the entity legally owns the receivables and they are not encumbered.

Step-by-step explanation:

When an auditor reviews bank confirmations for any liens on receivables, they are testing the Rights and obligations assertion. This assertion concerns whether the entity has the rights to the assets and whether the liabilities are the obligations of the entity. In the context of receivables, the auditor needs to confirm that the entity has the rights to the receivables and that they are not pledged as collateral or subject to liens or other restrictions. Therefore, Option 3: Rights and obligations is the correct answer.

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