{"id":"F2006L01385","name":"ASA 510 - Initial Engagements – Opening Balances - April 2006","slug":"asa-510-initial-engagements-opening-balances-april-2006","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"repealed","isInForce":false,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":58950,"registerId":"commonwealth-F2006L01385-current","compilationNumber":null,"startDate":"2026-04-02","status":"Repealed","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"Compiled Auditing Standard","sectionType":"section","heading":"Compiled Auditing Standard","content":"###### Compiled Auditing Standard","sortOrder":0},{"sectionNumber":"Obtaining a Copy of Auditing Standards","sectionType":"section","heading":"Obtaining a Copy of Auditing Standards","content":"###### Obtaining a Copy of Auditing Standards\n\nThe most recently compiled versions of Auditing Standards, original Standards and amending Standards (see Compilation Details) are available on the AUASB website: www.auasb.gov.au.\n\nAlternatively, printed copies of Auditing Standards are available by contacting:\n\n| Auditing and Assurance Standards BoardLevel 7600 Bourke StreetMelbourne Victoria 3000AUSTRALIA | Phone: (03) 8080 7400Fax: (03) 8080 7450E-mail: enquiries@auasb.gov.auPostal Address:PO Box 204Collins Street WestMelbourne Victoria 8007AUSTRALIA |\n| ---------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- |","sortOrder":1},{"sectionNumber":"COPYRIGHT","sectionType":"section","heading":"COPYRIGHT","content":"##### COPYRIGHT\n\n© Commonwealth of Australia 2007. The text, graphics and layout of this compiled Auditing Standard are protected by Australian copyright law and the comparable law of other countries. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of an acknowledgment of the source. Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to the Principal Executive, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne Victoria 8007. Otherwise, no part of the compiled Auditing Standard may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law.\n\nISSN 1833-4393","sortOrder":2},{"sectionNumber":"CONTENTS","sectionType":"part","heading":"CONTENTS","content":"#   \nCONTENTS\n\nCOMPILATION DETAILS\n\nAUTHORITY STATEMENT\n\nParagraphs\n\nApplication.................................. 1-2\n\nOperative Date................................ 3\n\nIntroduction.................................. 4-6\n\nAudit Procedures.............................. 7-13\n\nAudit Conclusions and Reporting.................... 14-20\n\nConformity with International Standards on Auditing...... 21\n\nAppendix 1: Examples of Modified Auditor’s Reports","sortOrder":3},{"sectionNumber":"compilation details","sectionType":"part","heading":"compilation details","content":"###### Obtaining a Copy of Auditing Standards\n\nThe most recently compiled versions of Auditing Standards, original Standards and amending Standards (see Compilation Details) are available on the AUASB website: www.auasb.gov.au.\n\nAlternatively, printed copies of Auditing Standards are available by contacting:\n\n| Auditing and Assurance Standards BoardLevel 7600 Bourke StreetMelbourne Victoria 3000AUSTRALIA | Phone: (03) 8080 7400Fax: (03) 8080 7450E-mail: enquiries@auasb.gov.auPostal Address:PO Box 204Collins Street WestMelbourne Victoria 8007AUSTRALIA |\n| ---------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- |\n\n##### COPYRIGHT\n\n© Commonwealth of Australia 2007. The text, graphics and layout of this compiled Auditing Standard are protected by Australian copyright law and the comparable law of other countries. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of an acknowledgment of the source. Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to the Principal Executive, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne Victoria 8007. Otherwise, no part of the compiled Auditing Standard may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law.\n\nISSN 1833-4393\n\n#   \nCONTENTS\n\nCOMPILATION DETAILS\n\nAUTHORITY STATEMENT\n\nParagraphs\n\nApplication.................................. 1-2\n\nOperative Date................................ 3\n\nIntroduction.................................. 4-6\n\nAudit Procedures.............................. 7-13\n\nAudit Conclusions and Reporting.................... 14-20\n\nConformity with International Standards on Auditing...... 21\n\nAppendix 1: Examples of Modified Auditor’s Reports\n\n#   \ncompilation details\n\n## Auditing Standard ASA 510 Initial Engagements \\- Opening Balances as Amended\n\nThis compilation takes into account amendments up to and including 27 June 2007 and was prepared on 27 June 2007 by the staff of the Auditing and Assurance Standards Board (AUASB).\n\nThis compilation is not a separate Auditing Standard made by the AUASB. Instead, it is a representation of ASA 510 (April 2006) as amended by an other Auditing Standard which is listed in the Table below.\n\n#### Table of Standards\n\n| Standard   | Date made     | Operative date                                                           |\n| ---------- | ------------- | ------------------------------------------------------------------------ |\n| ASA 510    | 28 April 2006 | 1 July 2006                                                              |\n| ASA 2007-1 | 27 June 2007  | 1 July 2007 (Auditor’s reports signed and dated on or after 1 July 2007) |\n\n#### Table of Amendments\n\n| Paragraph affected    | How affected | By … [paragraph]                |\n| --------------------- | ------------ | ------------------------------- |\n|                       |              |                                 |\n| Appendix 1, Example 1 | Amended      | ASA 2007-1 [19, 20, 21, 23, 32] |\n| Appendix 1, Example 2 | Amended      | ASA 2007-1 [19]                 |\n\n##   \nAUTHORITY STATEMENT\n\nAuditing Standard ASA 510 Initial Engagements – Opening Balances (as amended 27 June 2007) is set out in paragraphs 1 to 21 and Appendix 1.\n\nThis Auditing Standard is to be read in conjunction with the Preamble to AUASB Standards, which sets out the intentions of the AUASB on how the Auditing Standards are to be understood, interpreted and applied.\n\nThe mandatory requirements of this Auditing Standard are set out in bold-type paragraphs.","sortOrder":4},{"sectionNumber":"Auditing Standard ASA 510 Initial Engage","sectionType":"part","heading":"Auditing Standard ASA 510 Initial Engagements - Opening Balances as Amended","content":"## Auditing Standard ASA 510 Initial Engagements \\- Opening Balances as Amended\n\nThis compilation takes into account amendments up to and including 27 June 2007 and was prepared on 27 June 2007 by the staff of the Auditing and Assurance Standards Board (AUASB).\n\nThis compilation is not a separate Auditing Standard made by the AUASB. Instead, it is a representation of ASA 510 (April 2006) as amended by an other Auditing Standard which is listed in the Table below.","sortOrder":5},{"sectionNumber":"Table of Standards","sectionType":"subdivision","heading":"Table of Standards","content":"#### Table of Standards\n\n| Standard   | Date made     | Operative date                                                           |\n| ---------- | ------------- | ------------------------------------------------------------------------ |\n| ASA 510    | 28 April 2006 | 1 July 2006                                                              |\n| ASA 2007-1 | 27 June 2007  | 1 July 2007 (Auditor’s reports signed and dated on or after 1 July 2007) |","sortOrder":6},{"sectionNumber":"Table of Amendments","sectionType":"subdivision","heading":"Table of Amendments","content":"#### Table of Amendments\n\n| Paragraph affected    | How affected | By … [paragraph]                |\n| --------------------- | ------------ | ------------------------------- |\n|                       |              |                                 |\n| Appendix 1, Example 1 | Amended      | ASA 2007-1 [19, 20, 21, 23, 32] |\n| Appendix 1, Example 2 | Amended      | ASA 2007-1 [19]                 |\n\n##   \nAUTHORITY STATEMENT\n\nAuditing Standard ASA 510 Initial Engagements – Opening Balances (as amended 27 June 2007) is set out in paragraphs 1 to 21 and Appendix 1.\n\nThis Auditing Standard is to be read in conjunction with the Preamble to AUASB Standards, which sets out the intentions of the AUASB on how the Auditing Standards are to be understood, interpreted and applied.\n\nThe mandatory requirements of this Auditing Standard are set out in bold-type paragraphs.","sortOrder":7},{"sectionNumber":"AUTHORITY STATEMENT","sectionType":"part","heading":"AUTHORITY STATEMENT","content":"##   \nAUTHORITY STATEMENT\n\nAuditing Standard ASA 510 Initial Engagements – Opening Balances (as amended 27 June 2007) is set out in paragraphs 1 to 21 and Appendix 1.\n\nThis Auditing Standard is to be read in conjunction with the Preamble to AUASB Standards, which sets out the intentions of the AUASB on how the Auditing Standards are to be understood, interpreted and applied.\n\nThe mandatory requirements of this Auditing Standard are set out in bold-type paragraphs.","sortOrder":8},{"sectionNumber":"AUDITING STANDARD ASA 510","sectionType":"part","heading":"AUDITING STANDARD ASA 510","content":"## ![](image.002.png)AUDITING STANDARD ASA 510\n\n### Initial Engagements – Opening Balances\n\n##### Application\n\n1 This Auditing Standard applies to:\n\n(a) an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with Part 2M.3 of the Corporations Act 2001; and\n\n(b) an audit of a financial report for any other purpose.\n\n2 This Auditing Standard also applies, as appropriate, to an audit of other financial information.\n\n##### Operative Date\n\n3 This Auditing Standard is operative for financial reporting periods commencing on or after 1 July 2006.  \n\\[Note: For operative dates of paragraphs changed or added by an amending Standard, see Compilation Details.\\]\n\n##### Introduction\n\n4 The purpose of this Auditing Standard is to establish mandatory requirements and to provide explanatory guidance regarding opening balances when the financial report is audited for the first time or when the financial report for the prior period was audited by another auditor. This Auditing Standard would also be considered when the auditor becomes aware of contingencies and commitments existing at the beginning of the period. Explanatory guidance on the audit and reporting requirements regarding comparatives is provided in ASA 710 Comparatives.\n\n5 For initial audit engagements, the auditor shall obtain sufficient appropriate audit evidence that:\n\n(a) the opening balances do not contain misstatements that materially affect the current period’s financial report;\n\n(b) the prior period’s closing balances have been correctly brought forward to the current period or, when appropriate, have been restated; and\n\n(c) appropriate accounting policies are consistently applied or changes in accounting policies have been properly accounted for and adequately presented and disclosed.\n\n6 “Opening balances” means those account balances which exist at the beginning of the period. Opening balances are based upon the closing balances of the prior period and reflect the effects of:\n\n(a) transactions of prior periods; and\n\n(b) accounting policies applied in the prior period.\n\nIn an initial audit engagement, the auditor will not have previously obtained audit evidence supporting such opening balances.\n\n##### Audit Procedures\n\n7 Ordinarily, the sufficiency and appropriateness of the audit evidence the auditor needs to obtain regarding opening balances depends on such matters as the following:\n\n-   The accounting policies followed by the entity.\n-   Whether the prior period’s financial report was audited, and if so whether the auditor’s report was modified.\n-   The nature of the accounts and the risk of material misstatement in the current period’s financial report.\n-   The materiality of the opening balances relative to the current period’s financial report.\n\n8 Under paragraph 5 of this Auditing Standard, the auditor needs to consider:\n\n(a) whether opening balances reflect the application of appropriate accounting policies and that those policies are consistently applied in the current period’s financial report; and\n\n(b) when there are any changes in the accounting policies or application thereof, whether the accounting policies are appropriate and properly accounted for and adequately presented and disclosed.\n\n9 When the prior period’s financial report was audited by another auditor, the current auditor may be able to obtain sufficient appropriate audit evidence regarding opening balances by reviewing the predecessor auditor’s working papers. In these circumstances, under ASA 600 Using the Work of Another Auditor, the current auditor needs to consider the professional competence and independence of the predecessor auditor. If the prior period’s auditor’s report was modified, under ASA 710, the auditor needs to pay particular attention in the current period to the matter which resulted in the modification.\n\n10 Prior to communicating with the predecessor auditor, under ASA 220 Quality Control for Audits of Historical Financial Information, the current auditor needs to consider the requirements of the applicable code of professional conduct of a professional accounting body.[\\[1\\]](#_ftn1)\n\n11 When the prior period’s financial report was not audited or when the auditor is not able to obtain sufficient appropriate audit evidence by using the audit procedures described in paragraph 9, the auditor ordinarily performs other audit procedures such as those discussed in paragraphs 12 and 13.\n\n12 For current assets and liabilities some audit evidence can ordinarily 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. In the case of inventories; however, it is more difficult for the auditor to be satisfied as to inventory on hand at the beginning of the period. Therefore, additional audit procedures are ordinarily necessary such as observing a current physical inventory taking and reconciling it back to the opening inventory quantities, performing audit procedures on the valuation of the opening inventory items, and performing audit procedures on gross profit and cut off. A combination of these audit procedures may provide sufficient appropriate audit evidence.\n\n13 For non current assets and liabilities, such as fixed assets, investments and long-term debt, the auditor ordinarily examines the accounting records and other information underlying the opening balances. In certain cases, the auditor may be able to obtain confirmation of opening balances with third parties, for example, for long-term debt and investments. In other cases, the auditor may need to carry out additional audit procedures.\n\n##### Audit Conclusions and Reporting\n\n14 If, after performing audit procedures including those set out above, the auditor is unable to obtain sufficient appropriate audit evidence concerning opening balances, the auditor’s report shall include:\n\n(a) a qualified opinion;\n\n(b) a disclaimer of opinion; or\n\n(c) an opinion which is qualified or disclaimed regarding the results of operations and unqualified regarding financial position.\n\n15 Examples of modified auditor’s reports are included at Appendix 1. See also ASA 701 Modifications to the Auditor’s Report.\n\n16 If the opening balances contain misstatements which could materially affect the current period’s financial report, under ASA 260 Communication of Audit Matters with Those Charged With Governance, the auditor needs to inform those charged with governance and management and, after having obtained management’s authorisation, the predecessor auditor, if any.\n\n17 If the effect of the misstatement is not properly accounted for and adequately presented and disclosed, the auditor shall express a qualified opinion or an adverse opinion, as appropriate.\n\n18 If the current period’s accounting policies have not been consistently applied in relation to opening balances and if the change has not been properly accounted for and adequately presented and disclosed, the auditor shall express a qualified opinion or an adverse opinion as appropriate.\n\n19 If a modification regarding the prior period’s financial report remains relevant and material to the current period’s financial report, the auditor shall modify the current period’s auditor’s report accordingly.\n\n20 If the entity’s prior period auditor’s report was modified, the auditor needs to consider the effect thereof on the current period’s financial report under paragraph 19 of this Auditing Standard. For example, if there was a scope limitation, such as one due to the inability to determine opening inventory in the prior period, the auditor may not need to qualify or disclaim the current period’s audit opinion.\n\n##### Conformity with International Standards on Auditing\n\n21 Except as noted below, this Auditing Standard conforms with International Standard on Auditing ISA 510 Initial Engagements – Opening Balances, issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants. The main difference between this Auditing Standard and ISA 510 is:\n\n-   this Auditing Standard includes examples of modified auditor’s reports at Appendix 1, whereas ISA 510 includes examples of modification to the auditor’s report in explanatory guidance paragraphs.\n\nCompliance with this Auditing Standard enables compliance with ISA 510.\n\n#####   \nAPPENDIX 1\n\n##### EXAMPLES OF MODIFIED AUDITOR’S REPORTS\n\nUnder paragraph 14 of this Auditing Standard, when the auditor is unable to obtain sufficient audit evidence concerning opening balances the auditor’s report needs to include:\n\n(a) a qualified opinion;\n\n(b) a disclaimer of opinion; or\n\n(c) an opinion which is qualified or disclaimed regarding the results of operations and unqualified regarding financial position.\n\nExample 1 illustrates a qualified opinion (a) above and Example 2 illustrates an opinion which is qualified or disclaimed regarding the results of operations and unqualified regarding financial position (c) above. For illustrations of modified opinions regarding (b) above, see ASA 701.\n\n##### example 1: qualified opinion\n\nINDEPENDENT AUDITOR’S REPORT[\\[2\\]](#_ftn2)\n\nTo the members of \\[name of entity\\]\n\nReport on the Financial Report[\\[3\\]](#_ftn3)\n\nWe have audited the accompanying financial report of \\[name of entity\\], which comprises the balance sheet as at 30 June 20XX, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration.[\\[4\\]](#_ftn4)\n\nDirectors’ Responsibility for the Financial Report\n\nThe directors of the \\[company/registered scheme/disclosing entity\\] are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. \\[In Note XX, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.[](#_ftn5)\\]\n\nAuditor’s Responsibility\n\nOur responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.\n\nAn audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.[\\[5\\]](#_ftn6) An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.\n\nWe believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.\n\nIndependence[\\[6\\]](#_ftn7)\n\nIn conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of \\[name of entity\\] on \\[date\\], would be in the same terms if provided to the directors as at the date of this auditor’s report.[\\[7\\]](#_ftn8)\n\nBasis for Qualified Auditor’s Opinion\n\nWe did not observe the counting of the physical inventory stated at $XXX as at 30 June 20X0, since that date was prior to our appointment as auditors. We were unable to satisfy ourselves as to the inventory quantities at that date by other audit procedures. Inventories, which are recorded at $XXX at 30 June 20X0 represent XX% of the entity’s recorded assets at that date.\n\nQualified Auditor’s Opinion\n\nIn our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to observe the counting of physical inventory and satisfy ourselves as to the opening balance of inventory, the financial report of \\[name of entity\\] is in accordance with the Corporations Act 2001, including:\n\n(a) giving a true and fair view of the \\[company/registered scheme/disclosing entity\\]’s financial position as at 30 June 20X1 and of its performance for the year ended on that date; and\n\n(b) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.\n\nOR\n\n\\[In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to observe the counting of physical inventory and satisfy ourselves as to the opening balance of inventory:\n\n(a) the financial report of \\[name of entity\\] is in accordance with the Corporations Act 2001, including:\n\n(i) giving a true and fair view of the \\[company/registered scheme/disclosing entity\\]’s financial position as at 30 June 20X1 and of its performance for the year ended on that date; and\n\n(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and\n\n(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note XX.[\\[†\\]](#_ftn9)\\]\n\nReport on Other Legal and Regulatory Requirements\n\n\\[Form and content of this section of the auditor’s report will vary depending on the nature of the auditor’s other reporting responsibilities.\\]\n\n\\[Auditor’s signature\\][\\[8\\]](#_ftn10)\n\n\\[Date of the auditor’s report\\]\n\n\\[Auditor’s address\\]\n\n#####   \nexample 2: opinion which is qualified or disclaimed regarding the results of operations and unqualified regarding financial position\n\nINDEPENDENT AUDITOR’S REPORT[\\[9\\]](#_ftn11)\n\nTo the members of \\[name of entity\\]\n\nReport on the Financial Report[\\[10\\]](#_ftn12)\n\nWe have audited the accompanying financial report of \\[name of entity\\], which comprises the balance sheet as at 30 June 20XX, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration.[\\[11\\]](#_ftn13)\n\nDirectors’ Responsibility for the Financial Report\n\nThe directors of the \\[company/registered scheme/disclosing entity\\] are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.\n\nAuditor’s Responsibility\n\nOur responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.\n\nAn audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.[\\[12\\]](#_ftn14) An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.\n\nWe believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.\n\nIndependence[\\[13\\]](#_ftn15)\n\nIn conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of \\[name of entity\\] on \\[date\\], would be in the same terms if provided to the directors as at the date of this auditor’s report.[\\[14\\]](#_ftn16)\n\nBasis for Qualified Auditor’s Opinion\n\nWe did not observe the counting of the physical inventory stated at $XXX as at 30 June 20X0, since that date was prior to our appointment as auditors. We were unable to satisfy ourselves as to the inventory quantities at that date by other audit procedures. Inventories, which are recorded at $XXX at 30 June 20X0 represent XX% of the entity’s recorded assets at that date.\n\nQualified Auditor’s Opinion\n\nIn our opinion. because of the significance of the above matter in relation to the results of the \\[company/registered scheme/disclosing entity\\]’s operations for the year to 30 June 20X1, we are not in a position to, and do not, express an opinion on the comparatives for 20X0 and the results of its operations and its cash flows for the year ended on that date.\n\nIn our opinion, the balance sheet of \\[name of entity/registered scheme/disclosing entity\\] is in accordance with the Corporations Act 2001, including:\n\n(a) giving a true and fair view of the \\[company/registered scheme/disclosing entity\\]’s financial position as at 30 June 20X1; and\n\n(b) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.\n\nReport on Other Legal and Regulatory Requirements\n\n\\[Form and content of this section of the auditor’s report will vary depending on the nature of the auditor’s other reporting responsibilities.\\]\n\n\\[Auditor’s signature\\][\\[15\\]](#_ftn17)\n\n\\[Date of the auditor’s report\\]\n\n\\[Auditor’s address\\]","sortOrder":9},{"sectionNumber":"Initial Engagements — Opening Balances","sectionType":"division","heading":"Initial Engagements — Opening Balances","content":"## ![](image.002.png)AUDITING STANDARD ASA 510\n\n### Initial Engagements – Opening Balances\n\n##### Application\n\n1 This Auditing Standard applies to:\n\n(a) an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with Part 2M.3 of the Corporations Act 2001; and\n\n(b) an audit of a financial report for any other purpose.\n\n2 This Auditing Standard also applies, as appropriate, to an audit of other financial information.\n\n##### Operative Date\n\n3 This Auditing Standard is operative for financial reporting periods commencing on or after 1 July 2006.  \n\\[Note: For operative dates of paragraphs changed or added by an amending Standard, see Compilation Details.\\]\n\n##### Introduction\n\n4 The purpose of this Auditing Standard is to establish mandatory requirements and to provide explanatory guidance regarding opening balances when the financial report is audited for the first time or when the financial report for the prior period was audited by another auditor. This Auditing Standard would also be considered when the auditor becomes aware of contingencies and commitments existing at the beginning of the period. Explanatory guidance on the audit and reporting requirements regarding comparatives is provided in ASA 710 Comparatives.\n\n5 For initial audit engagements, the auditor shall obtain sufficient appropriate audit evidence that:\n\n(a) the opening balances do not contain misstatements that materially affect the current period’s financial report;\n\n(b) the prior period’s closing balances have been correctly brought forward to the current period or, when appropriate, have been restated; and\n\n(c) appropriate accounting policies are consistently applied or changes in accounting policies have been properly accounted for and adequately presented and disclosed.\n\n6 “Opening balances” means those account balances which exist at the beginning of the period. Opening balances are based upon the closing balances of the prior period and reflect the effects of:\n\n(a) transactions of prior periods; and\n\n(b) accounting policies applied in the prior period.\n\nIn an initial audit engagement, the auditor will not have previously obtained audit evidence supporting such opening balances.\n\n##### Audit Procedures\n\n7 Ordinarily, the sufficiency and appropriateness of the audit evidence the auditor needs to obtain regarding opening balances depends on such matters as the following:\n\n-   The accounting policies followed by the entity.\n-   Whether the prior period’s financial report was audited, and if so whether the auditor’s report was modified.\n-   The nature of the accounts and the risk of material misstatement in the current period’s financial report.\n-   The materiality of the opening balances relative to the current period’s financial report.\n\n8 Under paragraph 5 of this Auditing Standard, the auditor needs to consider:\n\n(a) whether opening balances reflect the application of appropriate accounting policies and that those policies are consistently applied in the current period’s financial report; and\n\n(b) when there are any changes in the accounting policies or application thereof, whether the accounting policies are appropriate and properly accounted for and adequately presented and disclosed.\n\n9 When the prior period’s financial report was audited by another auditor, the current auditor may be able to obtain sufficient appropriate audit evidence regarding opening balances by reviewing the predecessor auditor’s working papers. In these circumstances, under ASA 600 Using the Work of Another Auditor, the current auditor needs to consider the professional competence and independence of the predecessor auditor. If the prior period’s auditor’s report was modified, under ASA 710, the auditor needs to pay particular attention in the current period to the matter which resulted in the modification.\n\n10 Prior to communicating with the predecessor auditor, under ASA 220 Quality Control for Audits of Historical Financial Information, the current auditor needs to consider the requirements of the applicable code of professional conduct of a professional accounting body.[\\[1\\]](#_ftn1)\n\n11 When the prior period’s financial report was not audited or when the auditor is not able to obtain sufficient appropriate audit evidence by using the audit procedures described in paragraph 9, the auditor ordinarily performs other audit procedures such as those discussed in paragraphs 12 and 13.\n\n12 For current assets and liabilities some audit evidence can ordinarily 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. In the case of inventories; however, it is more difficult for the auditor to be satisfied as to inventory on hand at the beginning of the period. Therefore, additional audit procedures are ordinarily necessary such as observing a current physical inventory taking and reconciling it back to the opening inventory quantities, performing audit procedures on the valuation of the opening inventory items, and performing audit procedures on gross profit and cut off. A combination of these audit procedures may provide sufficient appropriate audit evidence.\n\n13 For non current assets and liabilities, such as fixed assets, investments and long-term debt, the auditor ordinarily examines the accounting records and other information underlying the opening balances. In certain cases, the auditor may be able to obtain confirmation of opening balances with third parties, for example, for long-term debt and investments. In other cases, the auditor may need to carry out additional audit procedures.\n\n##### Audit Conclusions and Reporting\n\n14 If, after performing audit procedures including those set out above, the auditor is unable to obtain sufficient appropriate audit evidence concerning opening balances, the auditor’s report shall include:\n\n(a) a qualified opinion;\n\n(b) a disclaimer of opinion; or\n\n(c) an opinion which is qualified or disclaimed regarding the results of operations and unqualified regarding financial position.\n\n15 Examples of modified auditor’s reports are included at Appendix 1. See also ASA 701 Modifications to the Auditor’s Report.\n\n16 If the opening balances contain misstatements which could materially affect the current period’s financial report, under ASA 260 Communication of Audit Matters with Those Charged With Governance, the auditor needs to inform those charged with governance and management and, after having obtained management’s authorisation, the predecessor auditor, if any.\n\n17 If the effect of the misstatement is not properly accounted for and adequately presented and disclosed, the auditor shall express a qualified opinion or an adverse opinion, as appropriate.\n\n18 If the current period’s accounting policies have not been consistently applied in relation to opening balances and if the change has not been properly accounted for and adequately presented and disclosed, the auditor shall express a qualified opinion or an adverse opinion as appropriate.\n\n19 If a modification regarding the prior period’s financial report remains relevant and material to the current period’s financial report, the auditor shall modify the current period’s auditor’s report accordingly.\n\n20 If the entity’s prior period auditor’s report was modified, the auditor needs to consider the effect thereof on the current period’s financial report under paragraph 19 of this Auditing Standard. For example, if there was a scope limitation, such as one due to the inability to determine opening inventory in the prior period, the auditor may not need to qualify or disclaim the current period’s audit opinion.\n\n##### Conformity with International Standards on Auditing\n\n21 Except as noted below, this Auditing Standard conforms with International Standard on Auditing ISA 510 Initial Engagements – Opening Balances, issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants. The main difference between this Auditing Standard and ISA 510 is:\n\n-   this Auditing Standard includes examples of modified auditor’s reports at Appendix 1, whereas ISA 510 includes examples of modification to the auditor’s report in explanatory guidance paragraphs.\n\nCompliance with this Auditing Standard enables compliance with ISA 510.\n\n#####   \nAPPENDIX 1\n\n##### EXAMPLES OF MODIFIED AUDITOR’S REPORTS\n\nUnder paragraph 14 of this Auditing Standard, when the auditor is unable to obtain sufficient audit evidence concerning opening balances the auditor’s report needs to include:\n\n(a) a qualified opinion;\n\n(b) a disclaimer of opinion; or\n\n(c) an opinion which is qualified or disclaimed regarding the results of operations and unqualified regarding financial position.\n\nExample 1 illustrates a qualified opinion (a) above and Example 2 illustrates an opinion which is qualified or disclaimed regarding the results of operations and unqualified regarding financial position (c) above. For illustrations of modified opinions regarding (b) above, see ASA 701.\n\n##### example 1: qualified opinion\n\nINDEPENDENT AUDITOR’S REPORT[\\[2\\]](#_ftn2)\n\nTo the members of \\[name of entity\\]\n\nReport on the Financial Report[\\[3\\]](#_ftn3)\n\nWe have audited the accompanying financial report of \\[name of entity\\], which comprises the balance sheet as at 30 June 20XX, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration.[\\[4\\]](#_ftn4)\n\nDirectors’ Responsibility for the Financial Report\n\nThe directors of the \\[company/registered scheme/disclosing entity\\] are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. \\[In Note XX, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.[](#_ftn5)\\]\n\nAuditor’s Responsibility\n\nOur responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.\n\nAn audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.[\\[5\\]](#_ftn6) An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.\n\nWe believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.\n\nIndependence[\\[6\\]](#_ftn7)\n\nIn conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of \\[name of entity\\] on \\[date\\], would be in the same terms if provided to the directors as at the date of this auditor’s report.[\\[7\\]](#_ftn8)\n\nBasis for Qualified Auditor’s Opinion\n\nWe did not observe the counting of the physical inventory stated at $XXX as at 30 June 20X0, since that date was prior to our appointment as auditors. We were unable to satisfy ourselves as to the inventory quantities at that date by other audit procedures. Inventories, which are recorded at $XXX at 30 June 20X0 represent XX% of the entity’s recorded assets at that date.\n\nQualified Auditor’s Opinion\n\nIn our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to observe the counting of physical inventory and satisfy ourselves as to the opening balance of inventory, the financial report of \\[name of entity\\] is in accordance with the Corporations Act 2001, including:\n\n(a) giving a true and fair view of the \\[company/registered scheme/disclosing entity\\]’s financial position as at 30 June 20X1 and of its performance for the year ended on that date; and\n\n(b) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.\n\nOR\n\n\\[In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to observe the counting of physical inventory and satisfy ourselves as to the opening balance of inventory:\n\n(a) the financial report of \\[name of entity\\] is in accordance with the Corporations Act 2001, including:\n\n(i) giving a true and fair view of the \\[company/registered scheme/disclosing entity\\]’s financial position as at 30 June 20X1 and of its performance for the year ended on that date; and\n\n(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and\n\n(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note XX.[\\[†\\]](#_ftn9)\\]\n\nReport on Other Legal and Regulatory Requirements\n\n\\[Form and content of this section of the auditor’s report will vary depending on the nature of the auditor’s other reporting responsibilities.\\]\n\n\\[Auditor’s signature\\][\\[8\\]](#_ftn10)\n\n\\[Date of the auditor’s report\\]\n\n\\[Auditor’s address\\]\n\n#####   \nexample 2: opinion which is qualified or disclaimed regarding the results of operations and unqualified regarding financial position\n\nINDEPENDENT AUDITOR’S REPORT[\\[9\\]](#_ftn11)\n\nTo the members of \\[name of entity\\]\n\nReport on the Financial Report[\\[10\\]](#_ftn12)\n\nWe have audited the accompanying financial report of \\[name of entity\\], which comprises the balance sheet as at 30 June 20XX, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration.[\\[11\\]](#_ftn13)\n\nDirectors’ Responsibility for the Financial Report\n\nThe directors of the \\[company/registered scheme/disclosing entity\\] are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.\n\nAuditor’s Responsibility\n\nOur responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.\n\nAn audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.[\\[12\\]](#_ftn14) An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.\n\nWe believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.\n\nIndependence[\\[13\\]](#_ftn15)\n\nIn conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of \\[name of entity\\] on \\[date\\], would be in the same terms if provided to the directors as at the date of this auditor’s report.[\\[14\\]](#_ftn16)\n\nBasis for Qualified Auditor’s Opinion\n\nWe did not observe the counting of the physical inventory stated at $XXX as at 30 June 20X0, since that date was prior to our appointment as auditors. We were unable to satisfy ourselves as to the inventory quantities at that date by other audit procedures. Inventories, which are recorded at $XXX at 30 June 20X0 represent XX% of the entity’s recorded assets at that date.\n\nQualified Auditor’s Opinion\n\nIn our opinion. because of the significance of the above matter in relation to the results of the \\[company/registered scheme/disclosing entity\\]’s operations for the year to 30 June 20X1, we are not in a position to, and do not, express an opinion on the comparatives for 20X0 and the results of its operations and its cash flows for the year ended on that date.\n\nIn our opinion, the balance sheet of \\[name of entity/registered scheme/disclosing entity\\] is in accordance with the Corporations Act 2001, including:\n\n(a) giving a true and fair view of the \\[company/registered scheme/disclosing entity\\]’s financial position as at 30 June 20X1; and\n\n(b) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.\n\nReport on Other Legal and Regulatory Requirements\n\n\\[Form and content of this section of the auditor’s report will vary depending on the nature of the auditor’s other reporting responsibilities.\\]\n\n\\[Auditor’s signature\\][\\[15\\]](#_ftn17)\n\n\\[Date of the auditor’s report\\]\n\n\\[Auditor’s address\\]","sortOrder":10},{"sectionNumber":"Application","sectionType":"section","heading":"Application","content":"##### Application\n\n1 This Auditing Standard applies to:\n\n(a) an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with Part 2M.3 of the Corporations Act 2001; and\n\n(b) an audit of a financial report for any other purpose.\n\n2 This Auditing Standard also applies, as appropriate, to an audit of other financial information.","sortOrder":11},{"sectionNumber":"Operative Date","sectionType":"section","heading":"Operative Date","content":"##### Operative Date\n\n3 This Auditing Standard is operative for financial reporting periods commencing on or after 1 July 2006.  \n\\[Note: For operative dates of paragraphs changed or added by an amending Standard, see Compilation Details.\\]","sortOrder":12},{"sectionNumber":"Introduction","sectionType":"section","heading":"Introduction","content":"##### Introduction\n\n4 The purpose of this Auditing Standard is to establish mandatory requirements and to provide explanatory guidance regarding opening balances when the financial report is audited for the first time or when the financial report for the prior period was audited by another auditor. This Auditing Standard would also be considered when the auditor becomes aware of contingencies and commitments existing at the beginning of the period. Explanatory guidance on the audit and reporting requirements regarding comparatives is provided in ASA 710 Comparatives.\n\n5 For initial audit engagements, the auditor shall obtain sufficient appropriate audit evidence that:\n\n(a) the opening balances do not contain misstatements that materially affect the current period’s financial report;\n\n(b) the prior period’s closing balances have been correctly brought forward to the current period or, when appropriate, have been restated; and\n\n(c) appropriate accounting policies are consistently applied or changes in accounting policies have been properly accounted for and adequately presented and disclosed.\n\n6 “Opening balances” means those account balances which exist at the beginning of the period. Opening balances are based upon the closing balances of the prior period and reflect the effects of:\n\n(a) transactions of prior periods; and\n\n(b) accounting policies applied in the prior period.\n\nIn an initial audit engagement, the auditor will not have previously obtained audit evidence supporting such opening balances.","sortOrder":13},{"sectionNumber":"Audit Procedures","sectionType":"section","heading":"Audit Procedures","content":"##### Audit Procedures\n\n7 Ordinarily, the sufficiency and appropriateness of the audit evidence the auditor needs to obtain regarding opening balances depends on such matters as the following:\n\n-   The accounting policies followed by the entity.\n-   Whether the prior period’s financial report was audited, and if so whether the auditor’s report was modified.\n-   The nature of the accounts and the risk of material misstatement in the current period’s financial report.\n-   The materiality of the opening balances relative to the current period’s financial report.\n\n8 Under paragraph 5 of this Auditing Standard, the auditor needs to consider:\n\n(a) whether opening balances reflect the application of appropriate accounting policies and that those policies are consistently applied in the current period’s financial report; and\n\n(b) when there are any changes in the accounting policies or application thereof, whether the accounting policies are appropriate and properly accounted for and adequately presented and disclosed.\n\n9 When the prior period’s financial report was audited by another auditor, the current auditor may be able to obtain sufficient appropriate audit evidence regarding opening balances by reviewing the predecessor auditor’s working papers. In these circumstances, under ASA 600 Using the Work of Another Auditor, the current auditor needs to consider the professional competence and independence of the predecessor auditor. If the prior period’s auditor’s report was modified, under ASA 710, the auditor needs to pay particular attention in the current period to the matter which resulted in the modification.\n\n10 Prior to communicating with the predecessor auditor, under ASA 220 Quality Control for Audits of Historical Financial Information, the current auditor needs to consider the requirements of the applicable code of professional conduct of a professional accounting body.[\\[1\\]](#_ftn1)\n\n11 When the prior period’s financial report was not audited or when the auditor is not able to obtain sufficient appropriate audit evidence by using the audit procedures described in paragraph 9, the auditor ordinarily performs other audit procedures such as those discussed in paragraphs 12 and 13.\n\n12 For current assets and liabilities some audit evidence can ordinarily 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. In the case of inventories; however, it is more difficult for the auditor to be satisfied as to inventory on hand at the beginning of the period. Therefore, additional audit procedures are ordinarily necessary such as observing a current physical inventory taking and reconciling it back to the opening inventory quantities, performing audit procedures on the valuation of the opening inventory items, and performing audit procedures on gross profit and cut off. A combination of these audit procedures may provide sufficient appropriate audit evidence.\n\n13 For non current assets and liabilities, such as fixed assets, investments and long-term debt, the auditor ordinarily examines the accounting records and other information underlying the opening balances. In certain cases, the auditor may be able to obtain confirmation of opening balances with third parties, for example, for long-term debt and investments. In other cases, the auditor may need to carry out additional audit procedures.","sortOrder":14},{"sectionNumber":"Audit Conclusions and Reporting","sectionType":"section","heading":"Audit Conclusions and Reporting","content":"##### Audit Conclusions and Reporting\n\n14 If, after performing audit procedures including those set out above, the auditor is unable to obtain sufficient appropriate audit evidence concerning opening balances, the auditor’s report shall include:\n\n(a) a qualified opinion;\n\n(b) a disclaimer of opinion; or\n\n(c) an opinion which is qualified or disclaimed regarding the results of operations and unqualified regarding financial position.\n\n15 Examples of modified auditor’s reports are included at Appendix 1. See also ASA 701 Modifications to the Auditor’s Report.\n\n16 If the opening balances contain misstatements which could materially affect the current period’s financial report, under ASA 260 Communication of Audit Matters with Those Charged With Governance, the auditor needs to inform those charged with governance and management and, after having obtained management’s authorisation, the predecessor auditor, if any.\n\n17 If the effect of the misstatement is not properly accounted for and adequately presented and disclosed, the auditor shall express a qualified opinion or an adverse opinion, as appropriate.\n\n18 If the current period’s accounting policies have not been consistently applied in relation to opening balances and if the change has not been properly accounted for and adequately presented and disclosed, the auditor shall express a qualified opinion or an adverse opinion as appropriate.\n\n19 If a modification regarding the prior period’s financial report remains relevant and material to the current period’s financial report, the auditor shall modify the current period’s auditor’s report accordingly.\n\n20 If the entity’s prior period auditor’s report was modified, the auditor needs to consider the effect thereof on the current period’s financial report under paragraph 19 of this Auditing Standard. For example, if there was a scope limitation, such as one due to the inability to determine opening inventory in the prior period, the auditor may not need to qualify or disclaim the current period’s audit opinion.","sortOrder":15},{"sectionNumber":"Conformity with International Standards ","sectionType":"section","heading":"Conformity with International Standards on Auditing","content":"##### Conformity with International Standards on Auditing\n\n21 Except as noted below, this Auditing Standard conforms with International Standard on Auditing ISA 510 Initial Engagements – Opening Balances, issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants. The main difference between this Auditing Standard and ISA 510 is:\n\n-   this Auditing Standard includes examples of modified auditor’s reports at Appendix 1, whereas ISA 510 includes examples of modification to the auditor’s report in explanatory guidance paragraphs.\n\nCompliance with this Auditing Standard enables compliance with ISA 510.","sortOrder":16},{"sectionNumber":"APPENDIX 1","sectionType":"section","heading":"APPENDIX 1","content":"## ![](image.002.png)AUDITING STANDARD ASA 510\n\n### Initial Engagements – Opening Balances\n\n##### Application\n\n1 This Auditing Standard applies to:\n\n(a) an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with Part 2M.3 of the Corporations Act 2001; and\n\n(b) an audit of a financial report for any other purpose.\n\n2 This Auditing Standard also applies, as appropriate, to an audit of other financial information.\n\n##### Operative Date\n\n3 This Auditing Standard is operative for financial reporting periods commencing on or after 1 July 2006.  \n\\[Note: For operative dates of paragraphs changed or added by an amending Standard, see Compilation Details.\\]\n\n##### Introduction\n\n4 The purpose of this Auditing Standard is to establish mandatory requirements and to provide explanatory guidance regarding opening balances when the financial report is audited for the first time or when the financial report for the prior period was audited by another auditor. This Auditing Standard would also be considered when the auditor becomes aware of contingencies and commitments existing at the beginning of the period. Explanatory guidance on the audit and reporting requirements regarding comparatives is provided in ASA 710 Comparatives.\n\n5 For initial audit engagements, the auditor shall obtain sufficient appropriate audit evidence that:\n\n(a) the opening balances do not contain misstatements that materially affect the current period’s financial report;\n\n(b) the prior period’s closing balances have been correctly brought forward to the current period or, when appropriate, have been restated; and\n\n(c) appropriate accounting policies are consistently applied or changes in accounting policies have been properly accounted for and adequately presented and disclosed.\n\n6 “Opening balances” means those account balances which exist at the beginning of the period. Opening balances are based upon the closing balances of the prior period and reflect the effects of:\n\n(a) transactions of prior periods; and\n\n(b) accounting policies applied in the prior period.\n\nIn an initial audit engagement, the auditor will not have previously obtained audit evidence supporting such opening balances.\n\n##### Audit Procedures\n\n7 Ordinarily, the sufficiency and appropriateness of the audit evidence the auditor needs to obtain regarding opening balances depends on such matters as the following:\n\n-   The accounting policies followed by the entity.\n-   Whether the prior period’s financial report was audited, and if so whether the auditor’s report was modified.\n-   The nature of the accounts and the risk of material misstatement in the current period’s financial report.\n-   The materiality of the opening balances relative to the current period’s financial report.\n\n8 Under paragraph 5 of this Auditing Standard, the auditor needs to consider:\n\n(a) whether opening balances reflect the application of appropriate accounting policies and that those policies are consistently applied in the current period’s financial report; and\n\n(b) when there are any changes in the accounting policies or application thereof, whether the accounting policies are appropriate and properly accounted for and adequately presented and disclosed.\n\n9 When the prior period’s financial report was audited by another auditor, the current auditor may be able to obtain sufficient appropriate audit evidence regarding opening balances by reviewing the predecessor auditor’s working papers. In these circumstances, under ASA 600 Using the Work of Another Auditor, the current auditor needs to consider the professional competence and independence of the predecessor auditor. If the prior period’s auditor’s report was modified, under ASA 710, the auditor needs to pay particular attention in the current period to the matter which resulted in the modification.\n\n10 Prior to communicating with the predecessor auditor, under ASA 220 Quality Control for Audits of Historical Financial Information, the current auditor needs to consider the requirements of the applicable code of professional conduct of a professional accounting body.[\\[1\\]](#_ftn1)\n\n11 When the prior period’s financial report was not audited or when the auditor is not able to obtain sufficient appropriate audit evidence by using the audit procedures described in paragraph 9, the auditor ordinarily performs other audit procedures such as those discussed in paragraphs 12 and 13.\n\n12 For current assets and liabilities some audit evidence can ordinarily 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. In the case of inventories; however, it is more difficult for the auditor to be satisfied as to inventory on hand at the beginning of the period. Therefore, additional audit procedures are ordinarily necessary such as observing a current physical inventory taking and reconciling it back to the opening inventory quantities, performing audit procedures on the valuation of the opening inventory items, and performing audit procedures on gross profit and cut off. A combination of these audit procedures may provide sufficient appropriate audit evidence.\n\n13 For non current assets and liabilities, such as fixed assets, investments and long-term debt, the auditor ordinarily examines the accounting records and other information underlying the opening balances. In certain cases, the auditor may be able to obtain confirmation of opening balances with third parties, for example, for long-term debt and investments. In other cases, the auditor may need to carry out additional audit procedures.\n\n##### Audit Conclusions and Reporting\n\n14 If, after performing audit procedures including those set out above, the auditor is unable to obtain sufficient appropriate audit evidence concerning opening balances, the auditor’s report shall include:\n\n(a) a qualified opinion;\n\n(b) a disclaimer of opinion; or\n\n(c) an opinion which is qualified or disclaimed regarding the results of operations and unqualified regarding financial position.\n\n15 Examples of modified auditor’s reports are included at Appendix 1. See also ASA 701 Modifications to the Auditor’s Report.\n\n16 If the opening balances contain misstatements which could materially affect the current period’s financial report, under ASA 260 Communication of Audit Matters with Those Charged With Governance, the auditor needs to inform those charged with governance and management and, after having obtained management’s authorisation, the predecessor auditor, if any.\n\n17 If the effect of the misstatement is not properly accounted for and adequately presented and disclosed, the auditor shall express a qualified opinion or an adverse opinion, as appropriate.\n\n18 If the current period’s accounting policies have not been consistently applied in relation to opening balances and if the change has not been properly accounted for and adequately presented and disclosed, the auditor shall express a qualified opinion or an adverse opinion as appropriate.\n\n19 If a modification regarding the prior period’s financial report remains relevant and material to the current period’s financial report, the auditor shall modify the current period’s auditor’s report accordingly.\n\n20 If the entity’s prior period auditor’s report was modified, the auditor needs to consider the effect thereof on the current period’s financial report under paragraph 19 of this Auditing Standard. For example, if there was a scope limitation, such as one due to the inability to determine opening inventory in the prior period, the auditor may not need to qualify or disclaim the current period’s audit opinion.\n\n##### Conformity with International Standards on Auditing\n\n21 Except as noted below, this Auditing Standard conforms with International Standard on Auditing ISA 510 Initial Engagements – Opening Balances, issued by the International Auditing and Assurance Standards Board of the International Federation of Accountants. The main difference between this Auditing Standard and ISA 510 is:\n\n-   this Auditing Standard includes examples of modified auditor’s reports at Appendix 1, whereas ISA 510 includes examples of modification to the auditor’s report in explanatory guidance paragraphs.\n\nCompliance with this Auditing Standard enables compliance with ISA 510.\n\n#####   \nAPPENDIX 1\n\n##### EXAMPLES OF MODIFIED AUDITOR’S REPORTS\n\nUnder paragraph 14 of this Auditing Standard, when the auditor is unable to obtain sufficient audit evidence concerning opening balances the auditor’s report needs to include:\n\n(a) a qualified opinion;\n\n(b) a disclaimer of opinion; or\n\n(c) an opinion which is qualified or disclaimed regarding the results of operations and unqualified regarding financial position.\n\nExample 1 illustrates a qualified opinion (a) above and Example 2 illustrates an opinion which is qualified or disclaimed regarding the results of operations and unqualified regarding financial position (c) above. For illustrations of modified opinions regarding (b) above, see ASA 701.\n\n##### example 1: qualified opinion\n\nINDEPENDENT AUDITOR’S REPORT[\\[2\\]](#_ftn2)\n\nTo the members of \\[name of entity\\]\n\nReport on the Financial Report[\\[3\\]](#_ftn3)\n\nWe have audited the accompanying financial report of \\[name of entity\\], which comprises the balance sheet as at 30 June 20XX, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration.[\\[4\\]](#_ftn4)\n\nDirectors’ Responsibility for the Financial Report\n\nThe directors of the \\[company/registered scheme/disclosing entity\\] are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. \\[In Note XX, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.[](#_ftn5)\\]\n\nAuditor’s Responsibility\n\nOur responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.\n\nAn audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.[\\[5\\]](#_ftn6) An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.\n\nWe believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.\n\nIndependence[\\[6\\]](#_ftn7)\n\nIn conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of \\[name of entity\\] on \\[date\\], would be in the same terms if provided to the directors as at the date of this auditor’s report.[\\[7\\]](#_ftn8)\n\nBasis for Qualified Auditor’s Opinion\n\nWe did not observe the counting of the physical inventory stated at $XXX as at 30 June 20X0, since that date was prior to our appointment as auditors. We were unable to satisfy ourselves as to the inventory quantities at that date by other audit procedures. Inventories, which are recorded at $XXX at 30 June 20X0 represent XX% of the entity’s recorded assets at that date.\n\nQualified Auditor’s Opinion\n\nIn our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to observe the counting of physical inventory and satisfy ourselves as to the opening balance of inventory, the financial report of \\[name of entity\\] is in accordance with the Corporations Act 2001, including:\n\n(a) giving a true and fair view of the \\[company/registered scheme/disclosing entity\\]’s financial position as at 30 June 20X1 and of its performance for the year ended on that date; and\n\n(b) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.\n\nOR\n\n\\[In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to observe the counting of physical inventory and satisfy ourselves as to the opening balance of inventory:\n\n(a) the financial report of \\[name of entity\\] is in accordance with the Corporations Act 2001, including:\n\n(i) giving a true and fair view of the \\[company/registered scheme/disclosing entity\\]’s financial position as at 30 June 20X1 and of its performance for the year ended on that date; and\n\n(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and\n\n(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note XX.[\\[†\\]](#_ftn9)\\]\n\nReport on Other Legal and Regulatory Requirements\n\n\\[Form and content of this section of the auditor’s report will vary depending on the nature of the auditor’s other reporting responsibilities.\\]\n\n\\[Auditor’s signature\\][\\[8\\]](#_ftn10)\n\n\\[Date of the auditor’s report\\]\n\n\\[Auditor’s address\\]\n\n#####   \nexample 2: opinion which is qualified or disclaimed regarding the results of operations and unqualified regarding financial position\n\nINDEPENDENT AUDITOR’S REPORT[\\[9\\]](#_ftn11)\n\nTo the members of \\[name of entity\\]\n\nReport on the Financial Report[\\[10\\]](#_ftn12)\n\nWe have audited the accompanying financial report of \\[name of entity\\], which comprises the balance sheet as at 30 June 20XX, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration.[\\[11\\]](#_ftn13)\n\nDirectors’ Responsibility for the Financial Report\n\nThe directors of the \\[company/registered scheme/disclosing entity\\] are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.\n\nAuditor’s Responsibility\n\nOur responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.\n\nAn audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.[\\[12\\]](#_ftn14) An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.\n\nWe believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.\n\nIndependence[\\[13\\]](#_ftn15)\n\nIn conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of \\[name of entity\\] on \\[date\\], would be in the same terms if provided to the directors as at the date of this auditor’s report.[\\[14\\]](#_ftn16)\n\nBasis for Qualified Auditor’s Opinion\n\nWe did not observe the counting of the physical inventory stated at $XXX as at 30 June 20X0, since that date was prior to our appointment as auditors. We were unable to satisfy ourselves as to the inventory quantities at that date by other audit procedures. Inventories, which are recorded at $XXX at 30 June 20X0 represent XX% of the entity’s recorded assets at that date.\n\nQualified Auditor’s Opinion\n\nIn our opinion. because of the significance of the above matter in relation to the results of the \\[company/registered scheme/disclosing entity\\]’s operations for the year to 30 June 20X1, we are not in a position to, and do not, express an opinion on the comparatives for 20X0 and the results of its operations and its cash flows for the year ended on that date.\n\nIn our opinion, the balance sheet of \\[name of entity/registered scheme/disclosing entity\\] is in accordance with the Corporations Act 2001, including:\n\n(a) giving a true and fair view of the \\[company/registered scheme/disclosing entity\\]’s financial position as at 30 June 20X1; and\n\n(b) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.\n\nReport on Other Legal and Regulatory Requirements\n\n\\[Form and content of this section of the auditor’s report will vary depending on the nature of the auditor’s other reporting responsibilities.\\]\n\n\\[Auditor’s signature\\][\\[15\\]](#_ftn17)\n\n\\[Date of the auditor’s report\\]\n\n\\[Auditor’s address\\]","sortOrder":17},{"sectionNumber":"EXAMPLES OF MODIFIED AUDITOR’S REPORTS","sectionType":"section","heading":"EXAMPLES OF MODIFIED AUDITOR’S REPORTS","content":"##### EXAMPLES OF MODIFIED AUDITOR’S REPORTS\n\nUnder paragraph 14 of this Auditing Standard, when the auditor is unable to obtain sufficient audit evidence concerning opening balances the auditor’s report needs to include:\n\n(a) a qualified opinion;\n\n(b) a disclaimer of opinion; or\n\n(c) an opinion which is qualified or disclaimed regarding the results of operations and unqualified regarding financial position.\n\nExample 1 illustrates a qualified opinion (a) above and Example 2 illustrates an opinion which is qualified or disclaimed regarding the results of operations and unqualified regarding financial position (c) above. For illustrations of modified opinions regarding (b) above, see ASA 701.","sortOrder":18},{"sectionNumber":"example 1: qualified opinion","sectionType":"section","heading":"example 1: qualified opinion","content":"##### example 1: qualified opinion\n\nINDEPENDENT AUDITOR’S REPORT[\\[2\\]](#_ftn2)\n\nTo the members of \\[name of entity\\]\n\nReport on the Financial Report[\\[3\\]](#_ftn3)\n\nWe have audited the accompanying financial report of \\[name of entity\\], which comprises the balance sheet as at 30 June 20XX, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration.[\\[4\\]](#_ftn4)\n\nDirectors’ Responsibility for the Financial Report\n\nThe directors of the \\[company/registered scheme/disclosing entity\\] are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. \\[In Note XX, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.[](#_ftn5)\\]\n\nAuditor’s Responsibility\n\nOur responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.\n\nAn audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.[\\[5\\]](#_ftn6) An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.\n\nWe believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.\n\nIndependence[\\[6\\]](#_ftn7)\n\nIn conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of \\[name of entity\\] on \\[date\\], would be in the same terms if provided to the directors as at the date of this auditor’s report.[\\[7\\]](#_ftn8)\n\nBasis for Qualified Auditor’s Opinion\n\nWe did not observe the counting of the physical inventory stated at $XXX as at 30 June 20X0, since that date was prior to our appointment as auditors. We were unable to satisfy ourselves as to the inventory quantities at that date by other audit procedures. Inventories, which are recorded at $XXX at 30 June 20X0 represent XX% of the entity’s recorded assets at that date.\n\nQualified Auditor’s Opinion\n\nIn our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to observe the counting of physical inventory and satisfy ourselves as to the opening balance of inventory, the financial report of \\[name of entity\\] is in accordance with the Corporations Act 2001, including:\n\n(a) giving a true and fair view of the \\[company/registered scheme/disclosing entity\\]’s financial position as at 30 June 20X1 and of its performance for the year ended on that date; and\n\n(b) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.\n\nOR\n\n\\[In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to observe the counting of physical inventory and satisfy ourselves as to the opening balance of inventory:\n\n(a) the financial report of \\[name of entity\\] is in accordance with the Corporations Act 2001, including:\n\n(i) giving a true and fair view of the \\[company/registered scheme/disclosing entity\\]’s financial position as at 30 June 20X1 and of its performance for the year ended on that date; and\n\n(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and\n\n(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note XX.[\\[†\\]](#_ftn9)\\]\n\nReport on Other Legal and Regulatory Requirements\n\n\\[Form and content of this section of the auditor’s report will vary depending on the nature of the auditor’s other reporting responsibilities.\\]\n\n\\[Auditor’s signature\\][\\[8\\]](#_ftn10)\n\n\\[Date of the auditor’s report\\]\n\n\\[Auditor’s address\\]","sortOrder":19},{"sectionNumber":"example 2: opinion which is qualified or","sectionType":"section","heading":"example 2: opinion which is qualified or disclaimed regarding the results of operations and unqualified regarding financial position","content":"#####   \nexample 2: opinion which is qualified or disclaimed regarding the results of operations and unqualified regarding financial position\n\nINDEPENDENT AUDITOR’S REPORT[\\[9\\]](#_ftn11)\n\nTo the members of \\[name of entity\\]\n\nReport on the Financial Report[\\[10\\]](#_ftn12)\n\nWe have audited the accompanying financial report of \\[name of entity\\], which comprises the balance sheet as at 30 June 20XX, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration.[\\[11\\]](#_ftn13)\n\nDirectors’ Responsibility for the Financial Report\n\nThe directors of the \\[company/registered scheme/disclosing entity\\] are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.\n\nAuditor’s Responsibility\n\nOur responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.\n\nAn audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.[\\[12\\]](#_ftn14) An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.\n\nWe believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.\n\nIndependence[\\[13\\]](#_ftn15)\n\nIn conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of \\[name of entity\\] on \\[date\\], would be in the same terms if provided to the directors as at the date of this auditor’s report.[\\[14\\]](#_ftn16)\n\nBasis for Qualified Auditor’s Opinion\n\nWe did not observe the counting of the physical inventory stated at $XXX as at 30 June 20X0, since that date was prior to our appointment as auditors. We were unable to satisfy ourselves as to the inventory quantities at that date by other audit procedures. Inventories, which are recorded at $XXX at 30 June 20X0 represent XX% of the entity’s recorded assets at that date.\n\nQualified Auditor’s Opinion\n\nIn our opinion. because of the significance of the above matter in relation to the results of the \\[company/registered scheme/disclosing entity\\]’s operations for the year to 30 June 20X1, we are not in a position to, and do not, express an opinion on the comparatives for 20X0 and the results of its operations and its cash flows for the year ended on that date.\n\nIn our opinion, the balance sheet of \\[name of entity/registered scheme/disclosing entity\\] is in accordance with the Corporations Act 2001, including:\n\n(a) giving a true and fair view of the \\[company/registered scheme/disclosing entity\\]’s financial position as at 30 June 20X1; and\n\n(b) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.\n\nReport on Other Legal and Regulatory Requirements\n\n\\[Form and content of this section of the auditor’s report will vary depending on the nature of the auditor’s other reporting responsibilities.\\]\n\n\\[Auditor’s signature\\][\\[15\\]](#_ftn17)\n\n\\[Date of the auditor’s report\\]\n\n\\[Auditor’s address\\]","sortOrder":20}],"analysis":{"kimi_summary":{"_metrics":{"model":"kimi-k2.5","source":"moonshot-realtime","completionTokens":2533},"content_quality":"ok","complexity_score":5,"scope_assessment":{"changed":false,"description":"This compiled version incorporates minor amendments from ASA 2007-1 (June 2007), but the substantive scope remains unchanged from the original April 2006 standard. The amendments only updated the illustrative examples in Appendix 1 regarding modified auditor's report formatting, without expanding the standard's reach beyond initial audit engagements and opening balances."},"complexity_factors":["Cross-references to 6 other Auditing Standards (ASA 220, 260, 600, 710, 701, and International ISA 510)","Conditional reporting logic with three distinct modification types (qualified, disclaimer, or split opinion)","Asset-specific audit procedures distinguishing between current assets/liabilities and non-current items","Professional conduct requirements regarding communication with predecessor auditors","Compilation incorporates amendments from ASA 2007-1 affecting Appendix 1 examples"],"plain_english_summary":"This rulebook guides auditors on first‑time or successor engagements to obtain sufficient evidence that opening balances (prior year closing figures) are accurate, properly carried forward or restated, and consistent with accounting policies. If verification fails, auditors must issue a modified audit report (qualified, disclaimer, or split). It applies to registered company auditors in Australia auditing under the Corporations Act 2001."},"flash_summary":{"complexity_score":4,"scope_assessment":{"changed":false,"description":"The amendments reflected in the compilation change operative dates and amend examples in Appendix 1 (Compilation Details; Table of Amendments) but do not alter the Standard’s substantive scope: it still governs auditor responsibilities for opening balances. The Standard remains aligned with ISA 510 except that it includes example reports in Appendix 1 (para 21)."},"complexity_factors":["Professional judgement required to assess sufficiency and appropriateness of evidence (paras 5, 7-8).","Cross-references to other Auditing Standards and ethical codes, creating dependency on external requirements (ASA 600, ASA 220, ASA 710, ASA 260, ASA 701) (paras 9-10, 15-16, 19).","Different audit procedures depending on asset/liability type (current vs inventory vs non-current) and practicability of alternative evidence (paras 12-13).","Obligation to review predecessor auditor’s working papers and to evaluate that predecessor’s competence and independence adds procedural steps and potential delay (para 9).","Multiple possible auditor-report outcomes when evidence is insufficient (qualified opinion, disclaimer, or mixed opinion) and illustrative report templates in Appendix 1 (para 14; Appendix 1).","Mandatory communication steps with management, those charged with governance and, with authorisation, the predecessor auditor where misstatements are found (para 16).","Operative dates and amending standard references increase implementation detail (Compilation Details; Table of Amendments).","Conformity statement with ISA 510 but a stated main difference (inclusion of Appendix examples) requiring auditors to note jurisdictional variation (para 21)."],"plain_english_summary":"This Auditing Standard sets mandatory requirements for auditors on opening balances when starting an audit for the first time or taking over a client. It requires auditors to obtain sufficient, appropriate evidence that opening balances are not materially misstated, that prior closing balances have been correctly carried forward or restated, and that accounting policies are applied consistently. The Standard prescribes procedures for using a predecessor auditor’s work, alternative procedures for different asset types, and specific reporting options if adequate evidence cannot be obtained."}},"importantCases":[],"_links":{"self":"/api/acts/asa-510-initial-engagements-opening-balances-april-2006","history":"/api/acts/asa-510-initial-engagements-opening-balances-april-2006/history","analysis":"/api/acts/asa-510-initial-engagements-opening-balances-april-2006/analysis","conflicts":"/api/acts/asa-510-initial-engagements-opening-balances-april-2006/conflicts","importantCases":"/api/acts/asa-510-initial-engagements-opening-balances-april-2006/important-cases","documents":"/api/acts/asa-510-initial-engagements-opening-balances-april-2006/documents"}}