While conducting the audit of Shree Engineering Limited for the year ended 31st March, 2026, A & Co., Chartered Accountants, were required to…
CA Intermediate · Auditing and Ethics · MTP · September 2026
While conducting the audit of Shree Engineering Limited for the year ended 31st March, 2026, A & Co., Chartered Accountants, were required to consider the opening balances, as the company had been audited by another firm in the previous year. While planning the audit, the audit team considered the procedures required to obtain sufficient appropriate audit evidence regarding the opening balances. The team noted that the extent of such procedures would need to be determined having regard to the accounting policies followed by the company, the nature and significance of the opening balances, the risks of material misstatement and whether the previous year's financial statements had been audited. With reference to the above facts, explain the factors that determine the nature and extent of audit procedures for obtaining audit evidence regarding opening balances.
Suggested Answer and Working Notes:
Nature and Extent of Audit Procedures The nature and extent of audit procedures necessary to obtain sufficient appropriate audit evidence regarding opening balances depend on such matters as: The accounting policies followed by the entity. The nature of the account balances, classes of transactions and disclosures and the risks of material misstatement in the current period's financial statements. The significance of the opening balances relative to the current period's financial statements. Whether the prior period's financial statements were audited and, if so, whether the predecessor auditor's opinion was modified.
Topics: Audit Evidence
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