State the additional audit procedures to be conducted by CA. Shankar to obtain evidence in respect of opening balance of inventory as on 1st April,…

SA 510, “Initial Audit Engagements – Opening Balances”, states that in conducting an initial audit engagement, one of the objectives of the auditor with respect to opening balances is to obtain sufficient appropriate audit evidence about whether opening balances contain misstatements that materially affect the current period's financial statements. The auditor has to evaluate whether audit procedures performed in the current period provide evidence relevant to the opening balances or specific audit procedures are required to be performed to obtain evidence regarding the opening balances. In the case of inventories, however, the current period's audit procedures on the closing inventory balance provide little audit evidence regarding inventory on hand at the beginning of the period. Therefore, additional audit procedures may be necessary, and one or more of the following may provide sufficient appropriate audit evidence: Observing a current physical inventory count and reconciling it to the opening inventory quantities.Performing audit procedures on the valuation of the opening inventory items.Performing audit procedures on gross profit and cut-off. In case, if CA Shankar is unable to obtain sufficient appropriate audit evidence regarding the opening balances, the auditor shall express a qualified opinion or a disclaimer of opinion, as appropriate, in accordance with SA 705. Further, in case if CA Shankar concludes that the opening balances contain a misstatement that materially affects the current period's financial statements, and the effect of the misstatement is not properly accounted for or not adequately presented or disclosed, the auditor shall express a qualified opinion or an adverse opinion, as appropriate, in accordance with SA 705. Furthermore, in case If CA Shankar concludes that the accounting policies are not consistently applied in relation to opening balances in accordance with the applicable financial reporting framework; or a change in accounting policies is not properly accounted for or not adequately presented or disclosed in accordance with the applicable financial reporting framework, CA Shankar shall express a qualified opinion or an adverse opinion as appropriate in accordance with SA 705. Alternatively, it may be noted that if DSL has resorted to change in accounting policy, then it must have been consistently applied in relation to all the applicable figures of opening balances and the changes have to be properly accounted for. In which case, CA Shankar can mention the same in his audit report and need not issue a qualified opinion or adverse opinion, if the changes are proved as warranted and justified by the management and the fact of change is brought out in the financial statements of the entity.