AUD Initial Engagements · Updated November 2026

First-Year Audit: How Does the Auditor Know Beginning Balances Are Right?

Beginning balances matter because prior-period amounts can affect current-period income and ending balances.

Opening balances

Opening balances include prior-period amounts carried into the current period and can affect current profit, assets, liabilities, and equity.

Procedures

Evidence can come from predecessor working papers, current-period transactions that support opening amounts, records, and specific opening-balance procedures.

Accounting policies

The auditor evaluates whether policies are appropriate and consistently applied, including proper treatment of changes.

Unable to obtain evidence

A material inability to obtain sufficient evidence over opening balances can affect the current-period opinion.

The takeaway

A first-year auditor still needs sufficient evidence over opening balances that materially affect the current period.

Related Summit guides

Predecessor vs successorContinue with a related Summit CPA Review guide.Inventory observationContinue with a related Summit CPA Review guide.Audit opinionsContinue with a related Summit CPA Review guide.

FAQ

Can predecessor working papers help?

Yes.

Can opening inventory affect current-year income?

Yes.

Can insufficient evidence affect the opinion?

Yes.