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Audit report wording

Audit report wording

I am currently working on a first year audit of a company that has traded for 10+ years.

What is the correct wording for the audit report to say that the comparatives and opening balances have not been audited.

To make it worse, I think that the opening stock value is understated by £400,000
Graham Lindsay


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31st Oct 2008 14:38

Your audit report on the current year does not cover the P&L comparatives for the previous year, although it does cover the balance sheet comparatives which are, of course, the opening balances for the current year. Presumably, you will be auditing the opening balances in accordance with paras. 9 & 10 of ISA 510. You cannot qualify your audit report just because the previous accounts were not audited. You have to test the opening balances as part of your audit and draw your own conclusion.

If your firm prepared the unaudited accounts for the previous year, you should have no difficulty auditing the opening balances, but if you think the stock is understated, it suggests that this is a new client which you have acquired from a previous accountant. You do not give your reasons for believing that the stock is understated, but if you are confident, you should adjust the opening balances and not qualify your audit report. If you are not certain, you might seek the cop out of qualifying your audit report for limitation of scope - Example 4 in Appendix 2 of APB Bulletin 2006/6 might suit your purpose, but there are many other examples.

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