IntroductionIntroduction

Introduction

4 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.

5 For initial audit engagements, the auditor shall obtain sufficient appropriate audit evidence that:

(a) the opening balances do not contain misstatements that materially affect the current period’s financial report;

(b) the prior period’s closing balances have been correctly brought forward to the current period or, when appropriate, have been restated; and

(c) appropriate accounting policies are consistently applied or changes in accounting policies have been properly accounted for and adequately presented and disclosed.

6 “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:

(a) transactions of prior periods; and

(b) accounting policies applied in the prior period.

In an initial audit engagement, the auditor will not have previously obtained audit evidence supporting such opening balances.