4 (a) The purpose of ISA 510 ‘Initial Engagements – Opening Balances’ is to establish stan

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4 JOHNSTON CO
(a) Reporting responsibilities specific to initial engagements
For initial audit engagements, the auditor should obtain sufficient appropriate audit evidence that:
■ the opening balances do not contain misstatements that materially affect the current period’s financial statements;
■ the prior period’s closing balances have been correctly brought forward to the current period (or, where appropriate, have
been restated); and
■ appropriate accounting policies are consistently applied or changes in accounting policies have been properly accounted
for (and adequately presented and disclosed).
If the auditor is unable to obtain sufficient appropriate audit evidence concerning opening balances there will be a limitation
on the scope of the audit. The auditor’s report should include:
■ a qualified (‘except for’) opinion;
■ a disclaimer of opinion; or
■ in those jurisdictions where it is permitted, an opinion which is:
– qualified (or disclaimed) regarding the results of operations (i.e. on the income statement); and
– unqualified regarding financial position (i.e. on the balance sheet).
If the effect of a misstatement in the opening balances is not properly accounted for and adequately presented and disclosed,
the auditor should express a qualified (‘except for’ disagreement) opinion or an adverse opinion, as appropriate.
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 should similarly express
disagreement (‘except for’ or adverse opinion as appropriate).
However, if a modification regarding the prior period’s financial statements remains relevant and material to the current
period’s financial statements, the auditor should modify the current auditor’s report accordingly.