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Key points from ISA 510 (Initial engagement – opening balances)

ISA 510 provides guidance on auditors’ responsibilities in relation to opening balances where either the financial statements for the prior period were not audited or the financial statement for the prior period were audited by another auditor.

The objective of the auditor when considering such an initial audit engagement is to obtain sufficient appropriate audit evidence about whether ;



  • There is material misstatement in opening balances which affect current period’s financial statements and
  • Accounting policies reflected on opening balances have been consistently applied for current period or the change in accounting policy have been properly accounted for and disclosed

The following audit procedures are required when auditing opening balances

  • Read the most recent financial statements and audit report, if any, for information relevant to opening balances
  • Check that the prior period’s closing balances have been correctly brought forward
  • check that opening balances reflect appropriate accounting policies
  • One or more of the following procedures:
  1. when the prior period financial statement were audited, review the predecessor auditor’s working papers to obtain evidence on opening balances
  2. consider whether the audit procedures carried out in the current period provide evidence of some of the opening balances. for example cash received from customer in the current period gives evidence of the existence of the receivable at the opening date
  3. carry out specific audit procedures to obtain evidence of opening balances.
  • If evidence is found that opening balances could contain material misstatements affecting the current period’s financial statements perform appropriate  additional procedures to asses the effects, and
  • If such misstatements do exist, communicate this to those charged with governance in accordance with ISA 450.
  • Check that the accounting policies reflected in the opening balances have been consistently applied in the current period .



If the auditor is unable to obtain sufficient appropriate audit evidence regarding opening balances he should express qualified or disclaimer of opinion.

If the auditor concludes that the opening balances contain misstatement that materially affects the current period’s financial statements, and the effect of the misstatements is not appropriately accounted for or not appropriately presented or disclosed, the auditor shall express a qualified opinion or an adverse opinion
If the predecessor auditor’s opinion regarding the prior period’s financial statement included a modification to the auditor’s opinion that remains relevant and material to the current period’s financial statements, the auditor shall modify the auditor’s opinion on the current period’s financial statements
If accounting policies are not consistently applied express a qualified or adverse opinion

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