Page 130 - CA Final PARAM Digital Book.

• Determining whether the opening balances reflect the application of appropriate
accounting policies; and

➢ Current Audit Procedures to give evidence about opening balance: -
• For CA & CL: - Collection or Payment of Op balances will give evidence about
existence, completeness, valuation, rights & obligation.
For current assets and liabilities, some audit evidence about opening balances may be
obtained as part of the current period’s audit procedures. For example, the collection/
payment of opening accounts receivable/ accounts payable during the current period will
provide some audit evidence of their existence, rights and obligations, completeness and
valuation at the beginning of the period.

• For other Assets & Liabilities: - Documentary evidence regarding opening balance /
Confirmation from third parties
In respect of other assets and liabilities such as property plant and equipment, investments,
long term debts, the auditor will examine the records relating to opening balances. The
auditor may also be able to get the confirmation from third parties (e.g., balances of long-
term loan obtained from banks can be confirmed from the Bank Loan statement).

➢ If the auditor obtains audit evidence that the opening balances contain misstatements that could
materially affect the current period’s financial statements, the auditor shall perform such additional
audit procedures as are appropriate in the circumstances to determine the effect on the current
period’s financial statements. If the auditor concludes that such misstatements exist in the current
period’s financial statements, the auditor shall communicate the misstatements with the
appropriate level of management and those charged with governance.

➢ Drafting Audit Report: If the auditor is unable to obtain sufficient appropriate audit evidence
regarding the opening balances, the auditor shall express a qualified opinion or a disclaimer of
opinion, as appropriate. Further, If the auditor concludes that the opening balances contain a
misstatement that materially affects the current period’s financial statements, and the effect of the
misstatement is not properly accounted for or not adequately presented or disclosed, the auditor
shall express a qualified opinion or an adverse opinion.

QNO No Change, Opening Balance Case Old Course – (N15R, N17M, PM17, N18M, M20M)
66.100 TITANIUM CNO--SA510.020
CA. Jack, a recently qualified practicing Chartered Accountant got his first audit assignment of Futura (P)
Ltd. for the financial year 2017-18. He obtained all the relevant appropriate audit evidence for the items
related to Statement of Profit and Loss. However, while auditing the Balance Sheet items, CA. Jack left out
obtaining appropriate audit evidence, say, confirmations, from the outstanding Accounts Receivable
amounting Rs. 150 lakhs continued as it is from the last year, on the affirmation of the management
that there is no receipts and further credits during the year. CA. Jack, therefore, excluded from the
audit programme, the audit of accounts receivable on the understanding that it pertains to the
preceding year which was already audited by predecessor auditor. Comment.
OR
CA. Mack, a recently qualified practicing Chartered Accountant got his first audit assignment of Captura
(P) Ltd. for the financial year 2017-18. He obtained all the relevant appropriate audit evidence for the
items related to Statement of Profit and Loss. However, while auditing the Balance Sheet items, CA. Mack
left out obtaining appropriate audit evidence, say, confirmations, from the outstanding Accounts
Receivable amounting Rs. 145 lakhs continued as it is from the last year, on the affirmation of the
management that there is no receipts and further credits during the year. CA. Mack, therefore, excluded
from the audit programme, the audit of accounts receivable on the understanding that it pertains to the
preceding year which was already audited by predecessor auditor. Comment

Answer Part I -- Relevant Standards & Laws
▪ SA 510 “Initial Audit Engagements – Opening Balances

Part II -- Requirements of Relevant Standards & Laws
➢ Opening Balance Procedures

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