ISA 510 discussed Initial audit engagement and is relevant when.
- The business’s financial statement was unaudited. So, the auditor is required to assess the accuracy and completeness of the opening balance.
- The financial statement was audited by other firm of accountants/predecessor auditors. So, the current or new auditor is required to assess the reliability of the opening balance that will be published in the financial statement.
Scope of ISA 510
This ISA defines the auditor’s responsibility related to opening balances.
- Plan audit procedures for the opening balance.
- Execute audit procedures.
- Obtain sufficient and appropriate audit evidence on different assertions of the financial statement.
Additionally, the disclosures/facts/contingencies/commitments that existed at the beginning of the accounting period are included in the scope of ISA 510.
Requirements of ISA 510
ISA 510 requires auditors to execute the following.
- Ensure brought forward account balance is accurate.
- Ensure appropriate accounting policies have been consistently applied to reach the opening balance recorded in the financial statement.
- Review the working papers of the predecessor auditor to understand audit mechanics and assess whether the audit was conducted in accordance with applicable auditing standards.
- If inconsistency/misstatements are identified, communicate the matter to those charged with governance and evaluate the impact on the audit report. For instance, qualification/disclaimer can be given in the audit report.
Wrap up
ISA 510 defines auditor responsibility and the scope of the auditor’s role regarding opening balance/initial audit engagement. Initial audit engagement is when a predecessor auditor audited the opening balance or was not audited.
The auditor’s responsibility for the opening balance includes ensuring the accuracy of account balances, consistent application of accounting policies, and review of the working papers to provide sufficient and appropriate evidence-backed audit reports related to previous accounting period.
Daniyal Khatri, ACCA, is a seasoned bookkeeping specialist with over a decade of experience in designing precise, compliant financial systems. His expertise spans daily transaction tracking, ledger management, and financial record accuracy, ensuring businesses maintain organized, audit-ready books. Daniyal excels at aligning processes with evolving compliance standards, integrating user-friendly tools to automate workflows, and translating regulatory complexities into actionable steps. By combining technical proficiency with a focus on clarity, he empowers organizations to achieve error-free bookkeeping, minimize risk, and build a foundation for informed financial decisions.
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