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Assignment On Audit & Assurance- DIPL Ltd

   

Added on  2020-03-04

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AUDITING &ASSURANCE
Assignment On Audit & Assurance- DIPL Ltd_1

Audit & AssuranceAnswer-1As an auditor, while going through the facts and figures of DIPL Ltd., there are different kind of analytical procedures that can be applied that will in future help in making important financial and non-financial decisions of the company. Such an analysis will help in providing a true and fair view of the state of affairs of the company. When the auditor uses such procedures, it helps him in taking important financial decisions whilefinalizing the audit. Such procedures are of various kinds and shall be used in accordance with the method of financial recordings of the company as the auditor may deem fit as per the situations (Church et. al, 2008). While conducting an analysis the nature of evaluation needs to be considered and the main purpose.As per the observations in the present case, the auditor can use few analytical procedures as given below:a)The comparison of current year data of financial information with previous years, or withthe forecasts done for the future or with any industry in competition. A comparison sheds light on the manner in which the company operates and the trend it has captured in the past.In this type of technique, the data in the financial statements of the current year are compared with the data of financial statements of the preceding years so that the trend can be seen how the accounts have changed in various years and the reasons and implications of such changes are analyzed (Matthew, 2015). For example- the change in turnover is compared for preceding years with the current year and the increase or decrease is analyzed with respect to the reasons for such change. Increase in turnover is a good sign for the company but along with that, it should also be checked whether there has been any substantial increase which might be suspicious as the recovery from debtorsmight have been shown as sales by the company or dummy sales may have been booked. Even the discount received from creditors may have been booked as sales. Hence, the auditor needs to verify sales with the invoices (Johnstone et. al, 2014). It will shed light on the variances if any and will help in providing accurate details regarding the business.2
Assignment On Audit & Assurance- DIPL Ltd_2

Audit & AssuranceFurther, the comparison can be done with the competing companies in the industry so that it can be seen that whether there are any such accounts where there can be any management problems that need to be settled down.Apart from this, the comparison shall be done with the figures that were projected in the previous years for the current year so that deviations can be calculated and the reasons forthe same shall also be known (Geoffrey et. al, 2016).b)Balance confirmation of Debtors and Creditors and random checking of balances written off should be thoroughly checked because there exists the possibility that the balance may be collected or settled and the company does not have any information regarding this. The same recovery can be shown as sales for the corresponding period (Riddle, 2015). Hence, the auditor should check these points through confirmation statements.c)Ratios can be calculated showing relationship of one item of accounts to another. Few examples are- Gross Profit to Sales, Net Profit to Sales, Inventory to Sales, Current Ratio,Quick Ratio, Liquidity Ratio. Such ratios help in analyzing the trends of changes in these elements with a change in sales.If we calculate these ratios for 3 years under preview, we can see that the ratios are almost consistent in the given three years. Such as-i.Net Profit Ratio= Net Profit after Tax / Sales *100 2013= 23, 59,190/ 3, 42, 12,000 *100 = 6.902014= 22, 91,362/ 3, 76, 99,500 *100 = 6.082015= 29, 72,183/ 4, 34, 59,500 * 100 = 6.84ii.Gross Profit Ratio = Gross Profit / Sales *1002013 = 17.55%2014 = 16.14%2015 = 15.199%All other ratios are also to be considered. Other ratios such as solvency ratio and liquidity ratio will shed on another aspect. It is important for the auditor to ascertain whether the business is 3
Assignment On Audit & Assurance- DIPL Ltd_3

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