ISA 510 - Initial Audit Engagements - Opening Balances Flashcards
ISA 510: Initial Audit Engagements - Opening Balances
Conditional Standard:
> Applies only to initial Audit Engangements of Auditor.
> With respect to Opening Balances.
Initial Audit Engagement (meaning):
> Audit conducted for the 1st time with a Client,
> Where in previous year audited by predecessing Auditor, or
> Previous year remain Unaudited.
> For current year, Auditor is conducting Audit for the 1st time.
Financial Statements for the year ending 31st March 2022 ( 2021 to 2022) ( 1st of April 2021 to 31st of March 2022.
> Opening Balance + Transactions during the year = Closing balance of Current year. Make sure that you work on getting the correct Balances for the year ending 31 March 2021 which is prior year to ensure that everything is correct because prior year closing Balances have an impact on current year Balances.
Predecessor Auditor- Outgoing Auditor.
Opening Balance + Purchases - Sales = Closing Balance.
Opening Balance: Disclosure of
> Contingencies and Liabilities
Ensure there is Sufficient and Appropriate Audit Evidence in:
> There are no Material Misstatement in Opening Balances, ( Confirm that closing Balances from prior year are matching with Opening Balances for current year.)
> Ensure that Current Accounting policies are applied and consistently.
Specific Audit Procedures:
> Pursuing Audited financial statements & Audit Report from Prior Year.
> Audit Procedure of Current Year gives any information about Opening Balances.
> Specific procedure for Specific item.
If there are Misstatement in Opening Balances:
> Perform Additional Audit Procedures,
> On Conclusion- communicate with management and TCWG.
Accounting Policies - Opening Balances
> Ensure Appropriate Accounting Policies have been applied consistently.
> Any change in Accounting Policy - must be properly Accounted and Disclosed as per the FRFW.
Audit Report by Predecessor Auditor:
> Look for Modified opinions.
> Consider the reasons given.
> So for Current Year you will have to do Additional Procedures to see if the trend has stopped.
ISA 315.
Supposed:
> Cannot obtain Evidence,
> Qualified or Disclaimer.
> Obtained Evidence,
Qualified or Adverse.
Predecessor Auditor’s Report:
> Modification is not rectified,
> ISA 705 - Modified Opinion.
NB: If Opening Balance is Correct, Closing Balance of current year, is likely to be correct.
If the path you choose at the very beginning as Auditor is wrong, chances are high that the Conclusion will also be wrong, ie if you adopt wrong take on Balances, your closing balances will also be wrong.
