Opening Balances in an Initial Audit: What Evidence Does the Auditor Need?
A new auditor cannot ignore beginning balances because they can directly affect current-period results.
Why opening balances matter
Beginning inventory, receivables, liabilities, retained earnings, and other opening balances can affect current-period amounts.
Sources of evidence
The auditor may use predecessor information when permitted, supporting records, current-period activity, and other procedures tailored to the account.
Accounting policies
The auditor evaluates whether appropriate policies are consistently applied or properly changed and presented.
Exam strategy
Ask whether the opening balance affects the current year and what evidence could support it.
The takeaway
Initial-audit procedures must provide sufficient evidence that opening balances do not contain misstatements that materially affect the current-period statements.
Related Summit resources
FAQ
Can opening balances affect the current-year opinion?
Yes.
Can predecessor information be relevant?
Yes.
Do accounting-policy consistency issues matter?
Yes.