M/s Dheeraj & Associates, Chartered Accountants, have been appointed as statutory auditors of SPICE Limited for the year 2024-25. CA Dheeraj…

As per SA 510, “Initial Audit Engagements - Opening Balances”, initial audit engagement is an engagement in which either: The financial statements for the prior period were not audited; orThe financial statements for the prior period were audited by a predecessor auditor. The auditor shall read the most recent financial statements, if any, and the predecessor auditor's report thereon, if any, for information relevant to opening balances, including disclosures. The auditor shall obtain sufficient appropriate audit evidence about whether the opening balances contain misstatements that materially affect the current period's financial statements by: Determining whether the prior period's closing balances have been correctly brought forward to the current period or, when appropriate, any adjustments have been disclosed as prior period items in the current year's Statement of Profit and Loss;Determining whether the opening balances reflect the application of appropriate accounting policies; andPerforming one or more of the following:Where the prior year financial statements were audited, perusing the copies of the audited financial statements including the other relevant documents relating to the prior period financial statements;Evaluating whether audit procedures performed in the current period provide evidence relevant to the opening balances; orPerforming specific audit procedures to obtain evidence regarding the opening balances. In the given case, CA Dheeraj relied solely on the prior year's audited financial statements and did not apply any audit procedures regarding opening balances. In view of above, CA Dheeraj's point of view is not correct, and he would therefore be required to consider this as an initial audit engagement and perform appropriate audit procedures regarding the opening balances.