A new auditor first checks opening balances, prior audit results, accounting policies, unresolved recommendations and high-risk balance sheet areas. Management should prepare a first-year audit pack before fieldwork starts.
What does a change of auditor mean?
A change of auditor means the new audit firm must build knowledge of the business, controls, accounting policies and historical reporting issues. Even if the prior year was audited, the new auditor cannot simply assume that opening balances are correct.
Opening balances and ISA/KSB 510
Opening balances affect the current year's profit or loss through depreciation, inventory, provisions, deferred tax, receivables, accruals and equity movements. If opening balances are wrong, current-year results can be wrong even when current transactions are recorded correctly.
What will be checked first?
- Prior-year audit opinion and any modifications or emphasis paragraphs.
- Previous management letter and unresolved recommendations.
- Opening balance reconciliations to the prior audited financial statements.
- Accounting policies and changes in estimates or policies.
- Inventory, receivables, provisions, leases, tax and going concern risks.
- Access to predecessor auditor communication where appropriate and permitted.
How should management prepare?
Management should prepare a first-year audit pack: prior financial statements, trial balance bridge, audit adjustments, management letter status, inventory documentation, bank confirmations, tax reconciliations and the current-year closing timetable. This reduces repeated questions and avoids treating the change of auditor as a routine handover.
Useful related reads: how long the audit takes and what to do with management letter recommendations.
Frequently asked questions
Changing auditor this year?
JMFC helps companies organise first-year audit evidence and avoid delays around opening balances, predecessor communication and unresolved findings.