Opening Balances- Initial Audits

Question 1

What should the auditors do if prior F/S were audited by another firm?

Answer 1

1) Read the previous audit report
2) Request management to authorize the predecessor to respond to our inquiries and obtain audit documentation
3) Obtain sufficient evidence to prove that there were no material misstatements
4) make sure closing balances have properly been brought forward

Question 2

If the new auditors discover possible material misstatements, what should happen?

Answer 2

Arrange a meeting with the client and predecessor auditor for a 3-way meeting

Question 3

T/F: The new auditor should reference the predecessor auditor?

Answer 3

FALSE- YOU DO NOT REFERENCE THEM AT ALL AS THE BASIS FOR OTHER AUDITS

Question 4

If you’re unable to obtain sufficient evidence about the opening balances what should happen?

Answer 4

Issue

1) A qualified opinion
2) A disclaimer of opinion

Question 5

If there is a misstatement and the not adequately disclosed, what should happen?

Answer 5

Issue:

1) Qualified
2) Adverse opinion