Imagine you join a company mid-way through a cricket match — you need to know the score before you arrived to make sense of what's happening now. That's exactly the problem SA 510 solves. When you are appointed as auditor for the first time (a new engagement), the opening balances — assets, liabilities, equity at the start of the period — were not audited by you. But they directly affect the current year's profit and financial statements. SA 510 tells you: before you sign off on this year, you must get sufficient appropriate audit evidence that those opening numbers are not materially wrong.
Opening balances are simply the prior year's closing balances carried forward. They include things like inventory, receivables, fixed assets, loans, and retained earnings. The key risk is: if those numbers were wrong last year and no one caught it, that error flows straight into this year's Income Statement (e.g., overstated opening inventory → understated Cost of Goods Sold → overstated profit this year).
SA 510 requires you to check three things about opening balances: (1) they don't contain material misstatements that affect the current period; (2) the prior year's closing balances have been correctly brought forward; and (3) accounting policies have been consistently applied. Your approach depends on the situation. If a predecessor auditor existed, you should read their audit report and — with the client's permission — review their working papers. If the prior year was unaudited, you'll need to perform more direct procedures like attending a physical stock count at the start of the year (or using other cut-off procedures). For non-current assets like plant and machinery, reviewing past purchase invoices, depreciation schedules, and insurance records usually works. Inventory is the trickiest — you may need to trace opening stock through current-period purchases and sales. This is a favourite 4-mark / 6-mark question in Paper 5, especially the scenario-based format asking what procedures you would perform.