Final answer:
The auditor can determine whether a client has limited rights to accounts receivable by examining the client's agreement, reviewing financial statements and notes, and looking for disclosures or restrictions. For example, if receivables have been pledged as collateral for a loan, this indicates limited rights.
Step-by-step explanation:
The auditor can determine whether a client has limited rights to accounts receivable by examining the terms of the client's agreement with their customers. If the client has factored their receivables, meaning they have sold them to a third party, then they have limited rights to the receivables. The auditor can also review the client's financial statements and notes to see if there are any restrictions or disclosures regarding the accounts receivable.
For example, if the client's financial statements disclose that the receivables have been pledged as collateral for a loan, this indicates limited rights to the receivables.
Based on the information given in the question, the answer would be No Yes. This means that the auditor can determine whether a client has limited rights to accounts receivable.