SA-510 Initial Engagements- Opening Balances

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 June 2010 If co. has not followed AS in last year, can this be taken as bae to qualify the Audit Report of this year under SA-510 Initial Engagements- Opening Balances

Querist : Anonymous

Querist : Anonymous (Querist)

05 June 2010

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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22 July 2025 Great question!

Under SA 510 – Initial Engagements—Opening Balances, the auditor’s responsibility is to obtain sufficient appropriate audit evidence about whether the opening balances contain misstatements that materially affect the current period’s financial statements.

If the company did not follow Accounting Standards (AS) in the prior year, this could mean the opening balances may be misstated.

How does this affect your audit report under SA 510?
You cannot automatically qualify your current year audit report just because the prior year didn’t follow AS.

Instead, you need to:

Assess whether the prior year’s financial statements, including opening balances, are reliable.

Perform procedures to verify opening balances, such as:

Checking prior year audited financials (if available),

Reviewing supporting documentation,

Corroborating with third-party evidence,

Or re-performing prior period audit procedures if possible.

If you conclude the opening balances are materially misstated and that misstatement affects the current year’s financial statements, then yes, you would modify your audit opinion accordingly.

If you cannot obtain sufficient appropriate audit evidence regarding opening balances, you would express a disclaimer of opinion or a qualified opinion due to a scope limitation.

The issue of the prior year not following AS alone does not automatically lead to qualification, but it is a significant audit risk that must be addressed through audit procedures.

Summary
The prior year’s failure to follow AS raises red flags about opening balances.

SA 510 requires you to gather sufficient evidence about opening balances.

If you find material misstatements or cannot get evidence, modify your opinion.

If opening balances are properly adjusted or verified, then your current audit can be unqualified.

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