Initial Audit Engagements — Opening Balances

CAS 510

Initial Audit Engagements — Opening Balances

CAS 510

Definitions
  • Initial audit engagement – An engagement in which either:
    • The F/S for the prior period were not audited; or
    • The F/S for the prior period were audited by a predecessor auditor
Audit Procedures
  • The auditor should read the most recent F/S, if any, and the predecessor auditor’s report, if any, for information relevant to opening balances
  • Obtain sufficient appropriate audit evidence about whether the opening balances contain material misstatements by:
    1. Determining whether the prior period’s closing balances have been correctly brought forward to the current period
    2. Determining whether the opening balances reflect the application of appropriate accounting policies; and
    3. Performing one or more of the following:
      • Where the prior year F/S were audited, reviewing the predecessor auditor’s working papers to obtain evidence regarding the opening balances
      • Evaluating whether audit procedures performed in the current period provide evidence relevant to the opening balances
      • Performing specific audit procedures to obtain evidence regarding the opening balances
  • If auditor determines that the opening balances contain material misstatements that affect the current year’s F/S, communicate the misstatements with the appropriate level of management and those charged with governance
  • Obtain audit evidence about whether accounting policies reflected in the opening balances have been consistently applied in the current period
  • If the prior year F/S were audited by a predecessor auditor that had a modified opinion, the current auditor should consider the event giving rise to the modified opinion in assessing the current period’s risk of material misstatement
  • If auditor is unable to obtain sufficient appropriate evidence on the opening balances, express a qualified opinion or disclaim an opinion
  • If the auditor concludes that the opening balances contain a misstatement that materially affects the current period’s F/S, express a qualified opinion or an adverse opinion
  • If the auditor concludes that accounting policies are not consistently applied or if changes in accounting policies are not appropriately accounted for, issue a qualified or adverse opinion

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