What are Rights and Obligations?
Rights and obligations are an underlying assertion used in the construction of financial statements, stating that the organization has title to its stated assets and has an obligation to pay its stated liabilities. For example, management is asserting that an entity has title to the fixed assets that are summarized into a line item on the organization's balance sheet.
Auditors create audit procedures specifically to determine whether the assets and obligations reported by a client are actually associated with it. An auditor’s main concerns are whether the client is reporting all of the obligations for which it is liable, and whether it is reporting assets that it does not actually own.
