Page 125 - CA Inter Audit PARAM

CA Ravi Taori
• Performing one or more of the following:
o 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;
o Evaluating whether audit procedures performed in the current period
provide evidence relevant to the opening balances; or
o Performing specific audit procedures to obtain evidence regarding the
opening balances.
➢ Conclusion
From the above, it is quite clear that CA Pankaj is not correct in his approach and therefore would be
required to follow the initial audit engagement and also apply audit procedures regarding opening
balances.

QNO-- Specific Audit Procedures For Opening Balances (If required as per New Course – (M24M)
Circumstance
510.05
Bhaskar CNO – Unique
In an initial audit engagement, in the case of inventories, the current period’s audit procedures on the closing
inventory balance provide little audit evidence regarding inventory on hand at the beginning of theperiod.

Therefore, in such a case, additional audit procedures become necessary so that auditor may obtain sufficient
appropriate audit evidence. Discuss those additional audit procedures.
Answer In an initial audit engagement, in the case of inventories, the current period’s audit procedures on the closing
inventory balance provide little audit evidence regarding inventory on hand at the beginning of the period.
Therefore, additional audit procedures may be necessary, and one or more of the following may provide
sufficient appropriate audit evidence:

• Observing a current physical inventory count and reconciling it to the opening inventory quantities.
• Performing audit procedures on the valuation of the opening inventory items.
• Performing audit procedures on gross profit and cut-off.

QNO— Unable to Obtain S&A Audit Evidence About Opening Balance New Course – (SM25)
510.10 Bhaskar CNO - SA510.020 & SA510.080
An auditor is appointed for the first time for audit of accounts of an entity. The accounts of previous year
were unaudited. He is unable to obtain sufficient appropriate audit evidence regarding the opening
balances. What is his responsibility in this regard?
Answer Objectives
In conducting an initial audit engagement, the objective of the auditor with respect to opening balances is to
obtain sufficient appropriate audit evidence about whether:
(a) Opening balances contain misstatements that materially affect the current period’s financial
statements; and
(b) Appropriate accounting policies reflected in the opening balances have been consistently applied in
the current period’s financial statements, or changes thereto are properly accounted for and
adequately presented and disclosed in accordance with the applicable financial reporting framework.

Qualify or Disclaimer
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, in accordance with SA
705.

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