sa 510.pptx

7/27/2019 SA 510.pptx

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INITIAL AUDIT ENGAGEMENTS

-OPENING BALANCES

Ef: on or after April 1, 2010

7/27/2019 SA 510.pptx


Scope of this SA It deals with the auditor’s responsibilities relating to

opening balances when conducting an initial audit engagement.

In addition to financial statement amounts, opening balances

include matters requiring disclosure that existed at the beginning

of the period , such as contingencies and commitments.

When the financial statements include comparative

financial information, the requirements and guidance in SA 710

also apply. SA 300 includes additional requirements and

guidance regarding activities prior to starting an initial audit.

SA 510 Initial Audit Engagements - Opening Balances

Note:

SA 710, “Comparative Information- Corresponding Figures and Comparatives Financial Statements”.

SA 300, “Planning an Audit of Financial Statements”.

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Obtain sufficient & appropriate audit evidence about whether:

1) Opening balances contain misstatements that materiallyaffect the current period’s financial statements; and

2) Appropriate accounting policies reflected in the openingbalances have been consistently applied in the currentperiod’s financial statements, or changes thereto are

properly accounted for and adequately presented anddisclosed in accordance with the applicable financialreporting framework.

Objective

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DefinitionsInitial audit engagement :

An engagement in which either:

a) The financial statements for the prior period were not audited; or

b) The financial statements for the prior period were audited by a predecessor auditor.

Opening balances : Opening balances are based upon the closing balances of the

prior period and reflect the effects of transactions and events of prior periods and accounting policies applied in the prior period. Opening balances also include matters requiring disclosure that existed at the

beginning of the period, such as contingencies and commitments.Predecessor auditor :

The auditor from a different audit firm, who audited thefinancial statements of an entity in the prior period and who has beenreplaced by the current auditor.


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Requirements

Collecting information relevant to opening balances

Consistency of Accounting Policies

Relevant Information in the Predecessor Auditor’sReport

Audit Conclusions and Reporting

Modification to the Opinion in the Predecessor Auditor’s

Report


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The auditor shall read the most recent financial statements, if any, and

the predecessor auditor’s report thereon, if any, for information relevant to

opening balances, including disclosures.

The auditor shall obtain sufficient appropriate audit evidence about

whether the opening balances contain misstatements that materially affect the

current period’s financial statements by:

a) Determining whether the prior period’s closing balances have been

correctly brought forward to the current period or, when appropriate, any

adjustments have been disclosed as prior period items in the current

year’s Statement of Profit and Loss (AS-5)

b) Determining whether the opening balances reflect the application of

appropriate accounting policies.

SA 510 Initial Audit Engagements - Opening Balances Note:

(AS) 5, “Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies”

Collecting Information Relevant to

Opening Balances

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Performing one or more of the following predecessor to obtain sufficient auditevidence :

I. Where the prior year financial statements were audited, perusing the copies of the audited

financial statements including the other relevant documents relating to the prior period

financial statements;

II. Evaluating whether audit procedures performed in the current period provide evidence

relevant to the opening balances; orIII. Performing specific audit procedures to obtain evidence regarding the opening balances.

The nature and extent of audit procedures necessary to obtain sufficient appropriate

audit evidence regarding opening balances depend on such matters as:

a) The accounting policies followed by the entity.

b) The nature of the account balances, classes of transactions and disclosures and the risks of

material misstatement in the current period’s financial statements.

c) The significance of the opening balances relative to the current period’s financial statements.

d) Whether the prior period’s financial statements were audited and, if so, whether the

predecessor auditor’s opinion was modified.


Audit Procedures to obtain sufficient &

appropriate audit evidence

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Consistency of Accounting Policies

The auditor shall obtain sufficient appropriateaudit evidence about whether the accounting policiesreflected in the opening balances have beenconsistently applied in the current period’s financialstatements, and whether changes in the accounting policies have been properly accounted for andadequately presented and disclosed in accordance withthe applicable financial reporting framework.


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Relevant Information in the Predecessor

Auditor’s Report If the prior period’s financial statements were

audited by a predecessor auditor and there was amodification to the opinion, the auditor shall evaluatethe effect of the matter giving rise to the modificationin assessing the risks of material misstatement in thecurrent period’s financial statements in accordance with SA 315.


Note:

SA 315, “Identifying and Assessing the Risks of Material Misstatement Through Understanding the

Entity and Its Environment”.

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If the auditor is unable to obtain sufficient appropriateaudit evidence regarding the opening balances, the auditorshall express a qualified opinion or a disclaimer of opinion,as appropriate, in accordance with SA 705.

If the auditor concludes that the opening balancescontain a misstatement that materially affects the currentperiod’s financial statements, and the effect of themisstatement is not properly accounted for or not

adequately presented or disclosed, the auditor shall expressa qualified opinion or an adverse opinion, as appropriate, inaccordance with SA 705.


SA 705, “Modifications to the Opinion in the Independent Auditor’s Report”.

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If the auditor concludes that:

1) The current period’s accounting policies are notconsistently applied in relation to opening balances inaccordance with the applicable financial reporting

framework; or2) A change in accounting policies is not properly accounted

for or not adequately presented or disclosed inaccordance with the applicable financial reportingframework,

The auditor shall express a qualified opinion or anadverse opinion as appropriate in accordance with SA 705.



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Modification to the Opinion in the

Predecessor Auditor’s Report

If the predecessor auditor’s opinion regarding theprior period’s financial statements included a

modification to the auditor’s opinion that remainsrelevant and material to the current period’s financialstatements, the auditor shall modify the auditor’sopinion on the current period’s financial statements in

accordance with SA 705 and SA 710.


Note:


SA 710, “Comparative Information- Corresponding Figures and Comparatives Financial

Statements”.

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Summary:

Scope & Objective,

Collecting information relevant to opening balances,

Consistency of Accounting Policies, Relevant Information in the Predecessor Auditor’s

Report,

Audit Conclusions and Reporting,

Modification to the Opinion in the Predecessor Auditor’s

Report.


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sa 510.pptx

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