During an audit of an entity's stockholders' equity accounts,the auditor determines whether there are restrictions on retained earnings resulting from loans,agreements,or state law.This audit procedure most likely is intended to verify the ASB presentation and disclosure assertion of
A) Occurrence.
B) Completeness.
C) Rights and Obligations.
D) Understandability.

Question

Quizplus · Accepted Answer

The audit procedure of verifying restrictions on retained earnings resulting from loans, agreements or state law is intended to verify the Rights and Obligations assertion, which states that the entity has legal ownership or rights over the items presented in the financial statements. This assertion ensures that the entity has the right to use its resources, such as retained earnings, for its intended purpose without any constraints or restrictions. Therefore, verifying the existence of restrictions on retained earnings is essential to verify this assertion.

During an Audit of an Entity's Stockholders' Equity Accounts,the Auditor