1st Para : This case relates to NSA 510 ‘’Initial Audit Engagement Opening Balances ‘’.

2nd Para : As per Nsa 510 the objective/responsibility of auditor while auditing the financial statement
for the first time is to verify and obtain appropriate audit evidence regarding assertion as follow :

a. Whether opening balance contain misstatement which is materially affecting the financial
statement of current period &
b. A/c polices followed in preceeding period are also being followed in current period.

Further NSA 510 also specifies that auditor should determine whether prior period closing balances have
been correctly brought forward to current period or when appropriate any adjustment have been
disclosed in current year statement of profit and loss.

If the auditor concludes that opening balance contain misstatement that materially affect current period
financial statement and effect of misstatement is not properly accounted or disclosed the auditor shall
express qualified or an adverse opinion.

3rd Para : In the case of ABC ltd ,the misstatement is carried forward during current year & has affected
current year financials position as well so as explained above the auditor contention of ignoring previous
year misstatement is not valid . Goddar & Co should perform procedure as per NSA and modify his
opinion unless management is ready to correct misstatement.