Audit Risk and Financial Reporting
Added on 2020-02-18
6 Pages1244 Words225 Views
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Running head: AUDIT, ASSURANCE AND COMPLIANCEAudit, Assurance and ComplianceName of the Student:Name of the University:Author’s Note:Course ID:
AUDIT, ASSURANCE AND COMPLIANCE1Table of ContentsQuestion 1: Impact of results on audit procedures.....................................................................2Question 2: Mentioning about inheritance risk, which is leading to material misstatement risk....................................................................................................................................................4Question 3a: Identifying the risk factors....................................................................................5Question 3b: Mentioning about the fraud risk...........................................................................5Reference:..................................................................................................................................7
AUDIT, ASSURANCE AND COMPLIANCE2Question 1: Impact of results on audit proceduresParticulars201320142015Current ratio 1.42 1.47 1.50 Quick assets 0.83 0.94 0.85 receivables turnover 13.78 8.73 8.57 Days in receivables 26.49 41.83 42.61 Inventory turn over 12.50 11.84 8.82 Return on total asset18.25%14.41%11.37%ROE25.78%21.25%24.26%Debt to equity41.31%47.48%113.44%Debt to capital7.25%5.42%31.69%Interest coverage 41 40 5 gross profit17.55%16.13%15.20%net profit6.90%6.08%6.84%RATIOSEXPLANATIONSAUDIT IMPACTCurrentRatioUpward trend can be seenin the current ratio, wherevalue of current assetshave risen from 2013 to2015The current ratio of the company adequatelyincreased from 2013 to 2015. This mainlyraises the overall financial stability of theorganization. However, there is also arequirement that needs to be fulfilled by DIPL,which directly indicates that the overallfinancial statement could be manipulated. Theevaluation of profitability ratios depicts adecline in profits, while current assets rose.Therefore, use of Audit procedures couldeventually help in identifying any kind ofmisstatement.QuickRatioThe quick ration also roseby two basis points from0.83 to 0.85 in 2015.The overall currents assets have been increasedby increasing the inventory storage, whichcould be seen from quick ratio. Therefore, it ismainly a confirmation, where the managementof DIPL has relevantly used manipulativemeasures for supporting the loan requirements.ROEThe ROE has alsodeclined from 2013 in2015, as the overall equityof the organization hasincreased rapidly.The ROE of the company has increased, whererelevant equity supply has also escalated. Thismainly states that the company is forcing itsfinancial records to become more attractive forthe loan providers.ProfitabilityThe profitability ratiossuch as gross profit marginand interest coverageratios have directlyThe profitability of the organization hasdeclined over the period, which states that, thecompany’s revenue expenses have increasedexponentially. This mainly indicates that the
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