What do rights and obligations assert in an audit?

Rights and obligations are fundamental assertions in an audit that confirm the entity has legitimate ownership of its assets and that liabilities are associated with the entity’s responsibilities. When an auditor verifies that the entity has rights to its assets, they are assessing whether the recorded assets truly belong to the entity and whether these assets can be legally claimed or used by the entity.

This assertion plays a crucial role in ensuring the integrity and accuracy of the financial statements. For example, if an asset is recorded on the balance sheet but the entity does not have the rights to it due to lease agreements, outstanding liens, or other legal considerations, this could misrepresent the entity's financial position.

In contrast, the other choices do not directly relate to rights and obligations. While proper recording of transactions in the correct period and ensuring clarity of disclosures are important aspects of auditing, they pertain to different assertions such as completeness, cut-off, and presentation rather than ownership. Additionally, fully allocating accounts refers to accurate and appropriate classification, which is more about the presentation rather than the underlying assertion of rights and obligations.