ISA 510: Opening Balances in Initial Audit

Opening Balances

Procedures Reporting
(to ensure that opening balances are correct)

Evidence Obtained Scope Limitation Misstatement

1. Read last year's F/S and Audit Report.

Key Audit Matter – Qualified (if effect is material), or – Qualified (if effect is material), or
2. Perform one or more of following procedures: – Disclaimer of Opinion (if effect is pervasive) – Adverse Opinion (if effect is pervasive)
– Review Predecessor Auditor's working papers
(depending on Competence and Independence)
– Obtain evidence from current year's audit
procedures (e.g. subsequent receipt from debtors,
or payment to creditors)
– Obtain evdience from specific procedures on
opening balances (e.g. see below)

Inventory Non-Current Assets & Liabilities Share Capital and

(stock count at later date (Examination of accounting Reserves
& roll back, GP analysis, records, sending confirmation (inspection of sttutory
Valuation procedures) letter, physical inspection) filing with SECP)

Exam Tip: If allowed by law, auditor can also Split his opinion b/w:
Check in requirement whether the question requires – Income Statement, Cash Flow Statement (modified opinion), or
general procedures for all areas or procedures for – Balance Sheet (Unmodified Opinion)
specific areas.

Accounting Policies Modified Opinion on Prior Period F/S

Procedures Reporting if accounting Acceptance and continuance Risk Assessment Reporting

policy is changed procedures (KAM, if matter is significant) (depends on whether
(indication of inappropriate scope issue resolved or not)
Ensure that accounting policies are consistently limitation or disagreement)
applied. If a policy is changed, ensure that it: Appropriately accounting Not appropriately accounting
– achieves fair presentation. for and disclosed for and disclosed Issue Resolved Issue Not Resolved
– applied retrospectively.
– disclosed adequately.
Key Audit Matter – Qualified (if effect is material), or Unmodified Opinion Relevant to current year Not Relevant to current year
– Adverse Opinion (if effect is pervasive)

– Qualified (if effect is material), or – Qualified (if effect is material), or

– Adverse Opinion (if effect is pervasive) – Adverse Opinion (if effect is pervasive)