What is the primary purpose of reviewing lien waivers in auditing subcontractor payables?

• A. To confirm that subcontractors have waived their liens and to assess the risk of nonpayment
• B. To confirm the originality of invoices
• C. To confirm tax status of subcontractors
• D. To ensure insurance coverage

Answer: (B)

Lien waivers are documents where a subcontractor relinquishes its right to place a mechanic’s lien for the work covered by the payment. In auditing subcontractor payables, reviewing these waivers is about confirming that the company has obtained waivers for the amounts recorded, so there is legally no outstanding claim from the subcontractor for those specific jobs. This protects the project from future lien claims and helps verify that the amounts on the payables are legitimate and supported by agreed-upon waivers or payments in exchange for them. It also provides a signal about nonpayment risk: if a waiver accompanies a payment, the risk of a later lien for that work is reduced; if no waiver exists where one would be expected, there could be potential lien exposure.

The other options don’t fit because lien waivers don’t address whether invoices are original or authentic, nor do they verify the subcontractor’s tax status or insurance coverage. Those are separate audit concerns.