Question

Hello, I have the following question below regarding Audit Assertions. The answer says it is D and I would really appreciate it if you could provide me with an explanation. Thanks in advance!
-------------------------------------------------------------------------------------------------------------------

Q: Which of the following would not be considered a relevant assertion when testing transactions and events during a client audit?

A. Cutoff

B. Valuation, allocation, and accuracy

C. Existence and occurrence

D. Rights and obligations

Answer 1

Assertions are made by management basically telling the auditor that whatever is mentioned in financial statements is true and fair. Based on these assertions auditor performs various Audit procedures in order to confirm how correct these assertions are. There are various relevant assertions such as:
Cut Off- It basically tells that all transactions related to company have been recorded in the books of accounts as per correct accounting period
Valuation, allocation and Accuracy - This assertions tells that whatever entries are found in financial statements whether they relate to valuation of Assets and liabilities or amount of transactions are accurate and without any errors
Existence and occurrence - This assertions means that whatever assets and liabilities are mentioned in Financial statements were actually in existence at the end of financial year and all recorded transactions did occur as well
Rights and Obligations - This assertions calls for the ownership of the company specifying that rights of all assets mentioned in financial statements are owned by the company and company is also obligated towards all the liabilities mentioned as well.

From the above assertions it is clear that when it comes to testing assets and liabilities, than all of them are important but when we are testing transactions and events that we are basically concerned with their period of occurrence, the appropriate account in which they have been classified, recorded value of transactions and confirming that transactions actually did occur. Rights and Obligations are not considered a relevant assertion during a client audit for Transactions and Events.

(I hope this helps, If u have any queries, kindly let me know in comments)