ExpertMedium1 markMultiple Choice
CPA · Question 27 · Area 2: Risk Assessment
An auditor is planning the audit of a new client. Which of the following procedures is required to be performed regarding the client's opening balances?
An auditor is planning the audit of a new client. Which of the following procedures is required to be performed regarding the client's opening balances?
Answer options:
A.
Re-audit the prior year's financial statements to provide an opinion on them.
B.
Read the most recent financial statements, if any, and the predecessor auditor's report thereon.
C.
Rely entirely on the predecessor auditor's opinion without performing any additional work.
D.
Disclaim an opinion on the current year's income statement.
How to approach this question
Recall Initial Audit Engagements (AU-C 510). You must check opening balances. Step 1 is reading the old report.
Full Answer
B.Read the most recent financial statements, if any, and the predecessor auditor's report thereon.✓ Correct
Read the most recent financial statements, if any, and the predecessor auditor's report thereon.
The auditor should read the most recent financial statements and the predecessor auditor's report for information regarding opening balances and consistency of accounting principles.
Common mistakes
Thinking you must re-audit the prior year.
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