14.13 Review of compliance with accounting policies, opening balances, prior period audits by other auditors

Reviewing compliance with accounting policies, opening balances, and prior period audits conducted by other auditors are important aspects of the audit process. Here’s an overview of these reviews:

1. Review of Compliance with Accounting Policies: As part of the audit, the current auditor reviews the entity’s compliance with accounting policies. This involves assessing whether the financial statements have been prepared in accordance with the applicable accounting framework, such as International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP). The auditor examines the entity’s accounting policies, evaluates their consistency and appropriateness, and determines if they have been consistently applied throughout the financial reporting period.
2. Review of Opening Balances: The opening balances refer to the financial statement amounts at the beginning of the current reporting period. The auditor reviews the opening balances to ensure their accuracy and completeness. This may involve examining the prior year’s financial statements, comparing them to the current year’s opening balances, and verifying any significant changes or adjustments.
3. Prior Period Audits by Other Auditor: In some cases, the entity may have engaged a different auditor in previous years. If this is the case, the current auditor reviews the prior period audits conducted by the other auditor. The objective is to understand the work performed by the previous auditor, evaluate the reliability of their findings and conclusions, and determine if any relevant information or issues may impact the current audit.

During these reviews, the auditor considers the following:

• Documentation: The auditor examines relevant documentation, including the entity’s accounting policies, prior year financial statements, audit reports from previous auditors, and any other supporting documentation.
• Communication: The auditor may communicate with the previous auditor to obtain additional information or clarification regarding their work and findings. This may involve sharing information, exchanging opinions, and discussing any significant matters or areas of concern.
• Procedures and Tests: The auditor performs procedures and tests to evaluate the compliance with accounting policies, accuracy of opening balances, and reliability of the prior period audits. This may include analytical procedures, substantive testing, and reviewing supporting documentation.

The purpose of these reviews is to provide assurance that the financial statements are free from material misstatements and to assess the consistency and reliability of the financial information presented. The auditor aims to ensure that the entity’s accounting policies are appropriate and consistently applied, the opening balances are accurately stated, and any prior period audits conducted by other auditors are reliable and can be relied upon.

If the auditor identifies any issues or discrepancies during these reviews, they may need to perform additional audit procedures, seek additional information or explanations from management, or make appropriate adjustments to the financial statements.

Overall, reviewing compliance with accounting policies, opening balances, and prior period audits by other auditors is crucial in the audit process to ensure the accuracy, completeness, and reliability of the financial statements and to provide assurance to the users of the financial information.