Audit, Assurance and Compliance HI6026

Added on - 01 Mar 2020

  • HI6026


  • 11


  • 2624


  • 68


  • 0


Trusted by +2 million users,
1000+ happy students everyday
Showing pages 1 to 4 of 11 pages
Running head: AUDIT AND ASSURANCEAudit and AssuranceName of Student:Name of University:Author’s Note:
1AUDIT AND ASSURANCEQuestion 1: Analytical ApproachThe analytic approach to the economic declarations of the DIPL shows the method of thedissemination of information from it. Analytic approach can be in the form of financial ratios.With the help of analytic method of evaluation of financial announcements however,several accountants as well as financial analysts can interpret the information for allowing thearrival at crucial business decisions (Barr-Pulliamet al. 2017).The case of the common sizing analytical way allows the assessment of the economicannouncements to a common reference point. This results in the possible contrast of the financialstatements in connection to the different timeframes or in relation to several entities. Theassessors can consider the several item lines shown in the economic report along with thereporting method. For example, the way of registration of the items like assets, liabilities as wellas the owner’s equity in the economic reporting of the organisation along with the investigationaldigression from the usual situation (Bayer and Cowell 2016). The method of benchmarking isthought of as an analytic procedure and it should further be used for the audit plan assessment.The variance of the actual fiscal declaration from the standard enables the recognition of thedeviation as well as helps in the evaluation of the reason of the recognised variance. Along withthis the analysis of the ratio could be adjudged as an effectual analytic method that can be usedfor contrasting the financial declarations along with the audit plan assessment (Bepari and Mollik2015).Explanation:
2AUDIT AND ASSURANCEThe outcomes of the given analytical method can be analysed with the help of ratioanalysis for the last 3 years of financial statements of DIPL:The above table interprets about the liquidity, profitability and solvency status of thefirm. The above table reflects that the current ratio of DIPL has declined in the last year incomparison with the last few years. This reflects that the company is not utilizing its workingcapital cycle. In addition to this, the profit margin of the firm has also declined, which infers thatthe company is not able to manage its direct and indirect expenses. On the other hand, it can beinferred that solvency ratio of the firm is lower, which interprets that the firm is not exposed tofinancial leverage risk. This is a good sign for the firm; however, it needs to increase its liquidityand profitability position in order to meet its respective short-term debt obligations.Answer to Question 2:Several significant factors are innate in theauditing process, which constitutes theincident of material misstatements in the economic declarations of a specific entity. It canhowever be said that, several kinds of both systematic as well as unsystematic risks showing theway in which the financial misstatements are there in the organisations’ financial
3AUDIT AND ASSURANCEannouncements. Additionally the identified risks may be due to financial as well as non-financialfactors which can subsequently prevent a specific entity in reflecting a just view of the economicannouncements. Based on the information from Devos and Zackrisson (2015), the detected risksmay be associated with several risks of omission connected with risks of several unimaginableerrors of a specific bookkeeper. Hence it can be said that it is the business risk for the DIPL’sbusiness operations.Apart from this, the employees at DIPL are inexperienced and do not possess therequisite proficiency that has escalated the total inherent risk of the organisation. Additionally,such a lack of experience can result in the committing of errors or mistakes, thereby increasingthe inherent risks. This is due to the fact that the employees constitute a significant segment ofthe company and it is not feasible for the firm to ensure its business success as well as its growthin the future without the effective contributions from the employees. The other significant factorscontributing towards the inherent risk can be categorised into several segments like the externalas well as the ecological or environmental aspects as well as the materialistic misstatements inthe previous time points as well as the false exercises. The environmental aspects directing themethod towards the inherent risk comprises rapid alternations where the matters could ariseconnected to the valuation of inventory, intense competition in the market as well as the lack ofsufficient money. Apart from this, there is the chance of materialistic misstatements that candirect the DIPL towards the inherent risk in the years to come.The analytical process of the current case of the DIPL shows the fact that the issues aswell as the complexities related to the CEO succession constitutes the inherent risks also. In coreit can be said that the succession of CEO is different as the candidates are individuals (Graham2015). Hence, the commencement of the procedure, without complying to the strategy, delayed
You’re reading a preview
Preview Documents

To View Complete Document

Click the button to download
Subscribe to our plans

Download This Document