AU-C Section 510 states that the objectives of the auditor in conducting an initial audit or reaudit is to obtain sufficient evidence regarding opening balances to determine they are free of misstatements that materially affect the current period's financial statements. It is also the auditor's objective to determine that appropriate accounting policies â€“ or any changes â€“ have been consistently applied in the current period's financial statements, along with proper footnote disclosures.
Audit Procedures Audit procedures in AU-C Section 510 include the following:
1. Financial statements, footnotes, and the auditor's report, if any, from the prior period should be read for information relevant to the opening balances and disclosures, as well as the consistent application of accounting principles.
2. When the prior period was audited by a predecessor CPA, the auditor should request management for authorization to review the predecessor's documentation and for the predecessor to respond to the current auditor's inquiries to obtain information for use in planning and performing the engagement. If the predecessor's report is modified, the auditor should evaluate the effects on the current financial statements to comply with AU-C Section 315, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement.
3. Opening balances should be evaluated to determine if they contain any material misstatements that affect the current period's financial statements and footnotes. This evaluation should include:
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