The rights and obligations assertion for inventory relates to which of the following audit objectives?
A) Inventory is properly classified, described and disclosed in the financial statements.
B) The entity owns, or has the legal right to, all of the inventory on the balance sheet.
C) All inventory on the inventory listing is included in the financial statements.
D) All inventory owned by the entity at year-end is included on the balance sheet.

Question

Quizplus · Accepted Answer

The rights and obligations assertion for inventory relates to whether the entity owns, or has the legal right to, all of the inventory on the balance sheet. This assertion ensures that the inventory belongs to the entity and that there are no ownership or legal rights issues, such as consigned inventory or inventory held on behalf of others. Therefore, the best choice is B. The other options relate to completeness (C, D) and accuracy and presentation (A) assertions.

The Rights and Obligations Assertion for Inventory Relates to Which