Area II: Risk Assessment — CPA Practice Question 53

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Opening Balances (Initial Audit): You own the current year, which depends on the opening balance. You must verify them. Read the old report + Check the old papers (or test yourself).

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C.Read the most recent financial statements and the predecessor auditor's report, and obtain evidence that opening balances do not contain material misstatements.✓ Correct

AU-C 510 requires the auditor to obtain sufficient appropriate audit evidence about whether the opening balances contain misstatements that materially affect the current period's financial statements. This usually involves reading the prior financials and reviewing the predecessor's working papers.

Common mistakes

Thinking you can just trust the old auditor (Option A) or that you have to re-do their work (Option B).

An auditor is auditing the opening balances of a new nonissuer client. The prior year financial statements were audited by a predecessor auditor who issued an unmodified opinion. Which of the following procedures is the auditor REQUIRED to perform regarding the opening balances?

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Common mistakes

Practice the full CPA AUD Practice Exam 2

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