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SAS
No. 21 Initial Engagements - Opening Balances |
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 Status |
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Revised by Auditing Standards Committee in Taiwan on
2
November, 1999. |
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Summary |
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For initial audit engagements, the auditor should obtain sufficient
appropriate audit evidence that:
(a) The opening balances do not contain misstatements that
materially affect the current period’s financial statements;
(b) The prior period’s closing balances have been correctly brought
forward to the current period or, when appropriate, have been
restated; and
(c) Appropriate accounting policies are consistently applied or
changes in accounting policies have been properly accounted for and
adequately presented and disclosed. |
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Opening balances means those account balances which exist at the
beginning of the period. Opening balances are based upon the closing
balances of the prior period and reflect the effects of:
(a) Transactions of prior periods; and
(b) Accounting policies applied in the prior period.
(c) Contingencies or commitments existed at the end of the prior
period. |
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The sufficiency and appropriateness of the audit evidence the
auditor will need to obtain regarding opening balances depends on
such matters as the following:
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The accounting policies followed by the entity.
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Whether the prior period’s financial statements were audited,
and if so whether the auditor’s report was modified.
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Whether the prior period’s financial statements were prepared
in accordance with generally accepted accounting principles.
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The nature of the accounts and the risk of material
misstatement in the current period’s financial statements. |
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If the auditor is unable to obtain sufficient appropriate audit
evidence concerning opening balances, the auditor’s report should
include:
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A qualified opinion, or
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A disclaimer of opinion. |
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If the effect of the misstatement is not properly accounted for and
adequately presented and disclosed, the auditor should express a
qualified 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 express a qualified opinion or an 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. |
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 Effective
date
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This Statement is effective for audit of financial statements with
fiscal years ending on or after 31 December, 1999. |
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