Opening Balances - Initial Audits Flashcards
What effect would it have on the auditor’s report in an initial audit if the auditor bases conclusions about the opening balances of an entity’s financial statements on a review of the predecessor’s audit documentation?
None. The auditor should not refer to the predecessor auditor as providing a partial basis for the auditor’s opinion.
What is meant by the term “successor auditor acknowledgment letter”?
A letter that the predecessor auditor may request from the (successor) auditor to document the auditor’s agreement regarding the use of the predecessor auditor’s documentation as a precondition for allowing access to it. Such a letter is not required, however.
What is meant by the term “initial audit engagement”?
An engagement in which (1) the financial statements for the prior period were not audited; or (2) the financial statements for the prior period were audited by a predecessor auditor
What are the auditor’s responsibilities with respect to opening balances and whether they contain misstatements affecting the current-period financial statements?
- )Determine whether the prior closing balances have been properly brought forward.
- )Determine whether the opening balances reflect the application of appropriate accounting policies.
- )Evaluate whether audit procedures provide evidence relevant to the opening balances (e.g., by reviewing the predecessor’s audit documentation).
What is meant by the term “opening balances”?
Those account balances that exist at the beginning of the period (This also includes matters requiring disclosure that existed at the beginning of the period, such as contingencies and commitments.)
What is meant by the term “consent and acknowledgment letter”?
A letter that the predecessor auditor may request from an entity to document the entity’s authorization regarding the predecessor auditor’s communication with the (successor) auditor. Such a letter is not required, however.
