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HI6026 - Audit, Assurance and Compliance | Report

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Holmes Institute Sydney

   

Audit, Assurance and Compliance (HI6026)

   

Added on  2020-03-02

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HI6026 - The following document is based on your reading and understanding of the document. The paper has some questions answered based on your learnings. The paper has the following questions 1. Explain how results influence planning decisions for the audit if analytical procedures to the financial report information of DIPL for the last three year is applied. 2. Conduct risk assessment and find inherent risk factors that arise from the nature of DIPL’s business operations.

HI6026 - Audit, Assurance and Compliance | Report

   

Holmes Institute Sydney

   

Audit, Assurance and Compliance (HI6026)

   Added on 2020-03-02

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By student name ProfessorUniversityDate: 23 August 2017.
HI6026 - Audit, Assurance and Compliance | Report_1
1ContentsQuestion no 1..............................................................................2Question no 2..............................................................................6Question no 3..............................................................................8Refrences....................................................................................101 | P a g e
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2Question no 1Audit is a post facto activity to the preparation of the books of accounts conducted by theauditors to see the viability of the same. Multiple regulations across the world and the accountingorganisations ask for the audit to be conducted. It is an independent checking of the books of accounts,whether profit or loss incurring, small or big, trading or manufacturing, with the view to express anopinion whether the financials are prepared as per the financial reporting framework and whether theygive the unbiased view of the state of affairs. The purpose of the audit is not to find the frauds orchecking the mistakes and finding out errors, it is a review of the overall statements. It gives both theinternal and external users the assurance about their investments, stake, etc. Audit also results in thediscussion with the management in case the audit findings are not clear to the auditors andmanagement has applied some estimates and adjustments in the presentation and it helps in giving thesuggestions to the management to improve on the internal control and other diverse areas.Various procedures are being applied by the auditors to get reasonable assurance, however twomajor procedures are substantive and compliance audit procedures. Substantive audit Procedures arethe overall checking of the incomes, gains, expenses, losses, etc recorded in the books. The supportingand relevant evidences should back these. It also includes on its ambit the verification of the assets andliabilities being reported in get balance sheet at the yearend date. The main purpose of the auditorbehind checking this is to whether the falsification of the accounts has not occurred and whatever hasbeen recorded in the books is backed by value and substance over form. It also ensures whether theuniform accounting practices have been followed by the entity and whether it is aligned to the principlerequirement of consistency. Once this done, the auditors needs to check the internal financial controlbeing implemented in the entity and whether there is any need to changes or enhance the controlprocedures. If the internal financial control is weak, it would clearly indicate more chances of fraud andmore risk and hence, the extent of the audit procedures as well as the sample selection would bewidened. Whereas, if the internal controls strong in the entity, less risk would be perceived and less ofaudit procedures need to be applied and hence the auditor can focus more on the key result areas.Analytical audit procedures include a wide variety of analysis including ratio analysis, balance sheet andincome statement variation analysis, trend analysis from the industry trends, comparison of the actualsfrom the standard and the budgeted figures, etc. All this is done with the primary view of determiningthe nature, extent and timing of the audit procedures to be undertaken to complete the audit, it also2 | P a g e
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3helps in audit planning and how the activities needs to be aligned to detect the material misstatements,if any, in the financials[ CITATION Bae17 \l 1033 ].In the given case study, the client is DIPL, a printing press, and now the audit is being taken overby Stewart and Kathy forms the old auditors Jay and Associates, so it also becomes necessary to have acheck on the opening balances and take the key transition from the old auditors, if any. A ratio analysishas been done to check the trend of the company from 2013 to 2015 and whether the ratios adhere tothe standard limits. It includes all the 4 crucial parameters of ratio analysis basis which conclusion can bemade, i.e., liquidity ratios, profitability ratios, debt management ratios and asset management ratios.Since no data has been made available for the industry, the same has not been included in the workings[CITATION DeZ16 \l 1033 ].201320142015Total current assets5,385,9387,509,1509,600,929Total current liabilities3,780,0005,120,2506,397,500Result1.421.471.50201320142015Total current assets - Inventory - Prepaid expenses3,129,7504,837,7885,420,429Total current liabilities3,780,0005,120,2506,397,500Result0.830.940.85Current Ratio = Total current assets/ Total current liabilitiesLiquid ratio /Quick Ratio = (Total current assets - Inventory - Prepaid expenses)/ Total current liabilities1. Short term solvency or liquidity RatiosThe current and the liquid ratio has moved steadily and has remained within the limits of 2 and 1respectively, which is the standard, which states that the company would be able to meet its presentobligations and current liabilities with its current assets at any point of time.201320142015Total Debts3,780,0005,120,25013,897,500Total Assets5,120,25015,903,90026,147,991Result74%32%53%201320142015Total Debts3,780,0005,120,25013,897,500Total owners' equity9,150,00010,783,65012,250,491Result41%47%113%Debt ratio = (Total Debts / Total Assets) or ((Total assets- total owners' equity)/total assets)Debt to Equity Ratio = (Total Debt/Total owners' equity) or ((Total assets- total owners' equity)/total owners' equity)2. Debt Management Ratios3 | P a g e
HI6026 - Audit, Assurance and Compliance | Report_4

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