Subsection 2: Certification of accounts

The professional practice standard relating to the audit of the opening balance sheet of the first financial year certified by the statutory auditor, approved by the Minister of Justice, is shown below:

. NEP-510. Audit of the opening balance sheet of the first financial year certified by the statutory auditor

Introduction

01. When the statutory auditor intervenes in respect of the first year of his mandate, he shall verify that the closing balance sheet for the previous financial year used for the opening of the first financial year for which he certifies the accounts, referred to as the opening balance sheet, does not contain any significant anomalies likely to have an impact on the accounts for the financial year.

02. The purpose of this standard is to define the audit procedures that the statutory auditor, acting in the first year of his mandate, carries out as part of his assignment to audit the opening balance sheet.

>. 03. It also defines the consequences that the statutory auditor draws in his report from the conclusions reached as a result of the implementation of these audit procedures.

Audit procedures to be performed by the statutory auditor

04. The statutory auditor shall collect sufficient and appropriate information to enable him to verify that:

-the opening balance sheet account balances do not contain any material misstatements likely to have an impact on the accounts for the financial year;

-the presentation of the accounts and the valuation methods used have not changed from one financial year to the next. Where the statutory auditor identifies an accounting change during the financial year that requires comparative information to be presented in order to restore the comparability of the accounts, he shall apply the principles defined in the standard dealing with accounting changes.

05. In collecting these elements, the statutory auditor takes into account:

-his assessment of the risk of material misstatement of the accounts;

-whether or not the accounts for the previous financial year were certified by a statutory auditor and, if so, the opinion expressed by the predecessor.

06. Where the accounts for the previous financial year have been the subject of certification by an auditor, the auditor shall acquaint himself with the working file of his predecessor.

07. The unqualified certification of the accounts for the previous financial year constitutes a presumption that the opening balance sheet is true and fair. 08. Where the predecessor auditor has made an observation or reservation in connection with the certification of the accounts for the previous financial year, or has refused to certify them or has been unable to certify them, the auditor shall examine the points at the origin of this observation, reservation, refusal or inability to certify and shall remain attentive to any changes in these points. 09. If the accounts for the previous financial year have not been certified or if the statutory auditor has not obtained from the work of his predecessor the sufficient and appropriate elements deemed necessary, he shall implement the procedures set out below.

. 10. The audit procedures carried out by the statutory auditor for the purposes of certifying the accounts for the financial year may enable him to obtain sufficient and appropriate information to conclude on certain opening balance sheet account balances.

> The statutory auditor shall perform the following procedures. 11. When these procedures do not enable the statutory auditor to obtain the sufficient and appropriate information deemed necessary, he shall carry out additional procedures. In this way, the auditor can examine contracts and other internal or external documents that enable him to reach a conclusion regarding the assertions he wishes to verify. These procedures are generally relevant for verifying the balances of fixed asset accounts and certain liabilities such as loans. Similarly, in order to conclude as to the physical existence and valuation of inventories at the beginning of the financial year, the auditor may implement the following additional procedures:

observation of a physical stock-taking during the financial year and reconciliation of the items collected with the opening balances;

-review of gross margin and cut-off procedures;

Conclusions and report

12. Where the auditor is unable to perform the procedures described in the preceding paragraphs a posteriori on the opening balance sheet account balances, the auditor shall assess the impact on the expression of his opinion.

13. If, on completion of his work, the statutory auditor concludes that the accounts could be affected by a material misstatement arising from previous financial years, he shall inform the management and, if applicable, his predecessor.

14. If the material misstatement is confirmed and if management does not proceed with the appropriate accounting treatment, the statutory auditor shall assess the impact on the expression of his opinion.

15. Where the accounts for the previous financial year have not been certified by an auditor, the auditor shall mention this in his report at the end of the introduction.