Initial Audit Engagement – Opening Balances Auditing Help

1. The auditor should obtain evidence that:

• Opening balances do not contain misstatements that material affect the current financial statements.
• Opening balances have been correctly bright forward.
• Consistency of accounting policies.

2. If the prior period financial statements have been audited by another auditor:

• Review predecessor auditor’s working papers.
• Consider qualifications in the audit report of previous year.

3. If the prior year’s accounts were not audited:

• Subsequent collections form receivable sand payments payables may provide evidence as to the opening balances.
• Observing physical count after year end and working back ascertain opening balance of inventories.
• For non current assets, examine underlying records.
• For long term loans, obtain confirmation from third parties.

4. If the auditor is unable to perform the above procedures a  qualified or disclaimer of opinion may be necessary.

5. If the accounting policies have not been consistently followed and if the change has not been properly accounted for or disclosed the auditor should express a qualified opinion or adverse opinion.

6. If opening balances contain misstatements which could materially affect the current year’s financial statements, and the effect has not been properly accounted for and adequately presented and disclosed, the auditor should express qualified opinion or adverse opinion.

Posted on November 3, 2015 in Initial Audit Engagement - Opening Balances

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