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Audit, Assurance and Compliance | HI6026

   

Added on  2020-03-01

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AUDIT & ASSURANCE
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AuditingAnswer – 1Going by the case of DIPL Ltd, the auditor can take the help of various analytical procedures that will help in taking crucial decisions. Moreover, it will highlight a correct view of the entire business. The auditor needs to use the analytical procedure because it is vital for the auditor to provide an unbiased decision. To ensure this, the financial records need to be evaluated and from the observation, a detailed analysis can be made.In the case of DIPL, the auditor can use the analytical process in the following manner:i.Financial data comparisonThe data of the current year can be compared with that of the previous year that will enable forecasting for the future course of time or any other peer group. A comparison is just processof evaluation that sheds light on the company performance and the trend that it has witnessed.To ensure a good comparison it is imperative for the auditor to compare the current data with that of the previous year that will highlight the variations (Carcello, 2012). Moreover, an increase or decrease in the figures can be a note with ease. The changes can be studied in the light of the prevailing situation and a judgment can be made accordingly. The changes that happened in the sales, turnover, debtors and creditors information needs to be analyzed by theauditor to gain an advantage in the process (Baldwin, 2010). The same comparison can be made with of the peer group to find the trend and the performance.ii.Computation of RatioRatio computation can be defined as the best practice when it comes to evaluation of the data.Ratio sheds light on the performance of the company. The major ratios that speak volume of the company’s scenario are the profitability, liquidity, efficiency and solvency ratios. The profitability ratio of the company denotes that DIPL has performed on a consistent basis. The gross profit has declined in the past three years but the margin is a string. On the other hand, the net profit margin has increased in the past year signifying a strong control over the cost ofgoods sold. Further, the liquidity scenario of the company is strong and hence, no problem will arise in honoring the obligations (Brigs, 2013). The auditor needs to stress on the ratios and check whether the data align with the financial records. If there is a deviation then the same needs to highlight to the management. Moreover, the auditor needs to have applied the skills of due diligence so that any differences can be addressed.2
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Auditingiii.The balances of the debtors and the creditors need to be cross checked so that no misstatements have been done in this regard. The balances might be collected but not shown in the statement leading to differences (Bedard et.al, 2014). Hence, the auditor must analyze such points. 3
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